particular, financial intermediaries can invest resources to monitor the returns earned by firms. The inability to monitor perfectly leads to firms earning rents. Undeserving firms are financed, while deserving ones are under funded. A more efficient monitoring technology squeezes the rents...

the contribution of housing booms and busts to business cycles.

The paper examines the link between trade openness and the benefits of exchange rate flexibility under real foreign shocks and nominal rigidities. The benefits of exchange rate flexibility are defined as the welfare difference between outcomes under fixed exchange rates and under an optimized...

overall gains from openness.

Plenary session.

We find that the sunk entry cost estimated in a model with the necessary convex factor adjustment costs are about 50 percent smaller than they are in a model without other costs of adjustment.

We explore the quantitative importance of pricing complementarities in the context of a menu cost model of price adjustment. Using super-market scanner data, we document new evidence on the co-movement of prices and market shares at the product level, suggesting that changes in prices and market...

Our new paper takes the same model to European data. First, we apply the methodology of Shimer ("Reassessing the Ins and Outs of Unemployment", mimeo, 2005) to calculate time series for hiring and separation probabilities in a set of European countries that have data on short-term and long-term...

uninsurable wage risk, insurable wage risk, and measurement error.