Empirical evidence demonstrates that credit standards, including lending margins and collateral requirements, move in a countercyclical direction. In this study, we construct a small open economy model with financial frictions to generate the countercyclical movement in credit standards. Our...

We study the role of firm heterogeneity in affecting business cycle dynamics and optimal stabilization policy. Firms differ in their degree of cyclicality, and hence, exposure to aggregate risk, leading to firm-specific risk premia that influence resource allocations. The heterogeneous firm...

Empirical evidence demonstrates that credit standards, including lending margins and collateral requirements, move in a countercyclical direction. In this study, we construct a small open economy model with financial frictions to generate the countercyclical movement in credit standards. Our...

We study the role of firm heterogeneity in affecting business cycle dynamics and optimal stabilization policy. Firms differ in their degree of cyclicality, and hence, exposure to aggregate risk, leading to firm-specific risk premia that influence resource allocations. The heterogeneous firm...

We use a general equilibrium model of a monetary economy to understand the economics behind the correlation between in nation and oil futures returns. Oil is used as both, an input to the production of capital and as a consumption good. We estimate our model using maximum likelihood with the...

In most manufacturing industries output is adjusted in a lumpy way along three margins: shiftwork, weekend work, and closing a plant temporarily down. We incorporate such decisions into a dynamic general equilibrium model and study: (i) if such micro-level nonconvexities magnify business cycles;...

The unprecedented 11 September 2001 terrorist attacks in the United States caused massive casualties and damage, and ushered in an era of greater uncertainty. While a prompt and vigorous policy response helped limit the immediate economic impact of the aggression, the heightened terrorist threat...

The efficiency of macroeconomic policies depends on adequate business cycle approximation. Given that potential output and the output gap (the difference between actual and potential output) are not directly observable, their values need to be estimated using alternative statistical, structural,...

This paper provides a new explanation of why inflation is sluggish in response to aggregate demand shocks and why aggregate output changes as result of such shocks. We argue that these phenomena are related to lags between inputs and outputs in the production process, "production lags" for...

This paper suggests that non-fundamental component in asset prices is one of the drivers of financial and credit cycle. Presented model builds on the financial accelerator literature by including a stock market where limitedly-liable investors trade stocks of productive firms with stochastic...