We build a variation of the neoclassical growth model in which financial shocks to households or wealth shocks (in the sense of wealth destruction) generate recessions. Two standard ingredients that are necessary are (1) the existence of adjustment costs that make the expansion of the tradable...

We build a variation of the neoclassical growth model in which both wealth shocks (in the sense of wealth destruction) and financial shocks to households generate recessions. The model features three mild departures from the standard model: (1) adjustment costs make it difficult to expand the...

We investigate partial insurance and group risk sharing in extended family networks. Our approach is based on decomposing income shocks into group aggregate and idiosyncratic components, allowing us to measure the extent to which each is insured, having accounted for public insurance programs....

Following the 1994 financial crisis, the rate of saving of the Mexican economy fell from 21.7 percent to 19.8 percent of GDP. The decline was associated with a reduction in the rate of external saving from 6.9 to 0.5 percent between 1994 and 1995. The overall reduction was not more dramatic...