This paper analyzes the role of variable capital utilization rates in propagating shocks over the business cycle. To this end we formulate and estimate an equilibrium business cycle model in which cyclical capital utilization rates are viewed as a form of factor hoarding. We find that variable...

Capitalism is characterized by booms and busts. Periods of strong growth in output alternate with periods of declines in economic growth. Every macro-economic theory should attempt to explain these endemic business cycle movements. In this paper I present two paradigms that attempt to explain...

Employing a risk-allocation approach, this paper analyzes the extent to which a government subject to balanced-budget constraints should fluctuate tax or spending policies in response to economic volatility

This paper studies implications of the price reset hazard function for the monetary transmission mechanism of sticky price models. I first document some general analytical results that highlight the central role of the price (accumulative) distribution in linking the hazard function at the micro...

The business cycles theories of Wicksell (1898), Schumpeter (1912), Mises (1912), Hayek (1929, 1935) and Minsky (1986, 1992) explain business cycles by distorted prices on capital markets, buoyant credit expansion and overinvestment. The exuberance during the boom endogenously causes the...

The recent financial crisis highlights the importance of understanding how financial market conditions impact the real economy. We ask whether access to external finance typically varies over time, and if so what the effects are on investment and employment. Consistent with time-varying external...