We address an important business cycle fact, i.e., the amplified and hump-shaped responses of output to productivity shocks, in a dynamic general equilibrium model with financial frictions. Models with financial frictions in the current literature have either the amplification mechanism or the...

The current crisis and discussions, in the euro area in particular, show that sovereign debt crises/defaults are no longer restricted to developing economies. After crises in many Latin American countries, the literature on quantitative dynamic macro-models of sovereign default has been...

This paper contributes to the literature by documenting labor income share fluctuations in emerging economies and proposing an explanation for them. We show that emerging markets differ from developed markets in terms of changes in the labor share over the business cycle. Labor share is more...