This text provides a modern treatment of macroeconomic analysis. Particular emphasis is placed on the development of the microfoundations of macroeconomic theory.

In this paper, I provide a rationale for why money should earn interest; or, what amounts to the same thing, why risk-free claims to non-interest-bearing money should trade at discount. I argue that interest-bearing money is essential when individual money balances are private information. The...

This paper explores the link between technological change and the dynamics of the earnings distribution and production. Technological change not only advances society's collective capability but also changes the relative productivities of its members. This latter effect establishes the likely...

Why do societies impose legal restrictions that limit the disposable property rights of some individuals? The explanation proposed here is that these constraints arise as an institutional response against financial markets that, in a sense, work 'too well'. That is, we demonstrate how a...

This article investigates the role of beliefs over monetary policy in propagating the effects of monetary policy shocks within the context of a dynamic, stochastic general equilibrium model. In our model, monetary policy periodically switches between low and high money growth regimes. When...

We modify the Diamond-Dybvig [3] model studied in Green and Lin [5] to incorporate a self-interested banker who has a private record-keeping technology. A public record-keeping device does not exist. We find that there is a trade-off between sophisticated contracts that possess relatively good...

This paper develops a simple life-cycle model that embeds a theory of debt restrictions based on the existence of inalienable property rights a la Kehoe and Levine [1993. Debt constrained asset markets. Review of Economic Studies 60(4), 865-888; 2001. Liquidity constrained markets versus debt...