We develop a directed search model where buyers purchase goods produced by sellers through intermediaries. The presence of search frictions creates demand uncertainty and makes instantaneous replenishment impossible. To avoid the risk of stockout, an intermediary holds inventory. The...

This paper studies the equilibrium dynamics of an economy with firm selection and aggregate fluctuations. A firm has access to a noisy signal about the aggregate state and learns about its individual profitability (type) from realized revenue history. When a firm cannot separate the aggregate...

This paper shows that a production network facilitates expectations-driven business cycles. Through input-output linkages, changes in expected demand can cause business-cycle fluctuations and endogenous movements in the Solow residual. When inputs must be purchased one period in advance,...