We study a model with repeated moral hazard where financial contracts are not fully indexed to inflation because nominal prices are observed with delay as in Jovanovic & Ueda (1997). More constrained firms sign contracts that are less indexed to the nominal price and, as a result, their...

One key feature of the 2008-2009 crisis has been its international dimension, as most countries have experienced large synchronous contractions. The recent crisis has also been characterized by a sharp fall in employment but not in productivity. These two characterizing features of the recent...

Two observations suggest that financial globalization played an important role in the recent financial crisis. First, more than half of the rise in net borrowing of the U.S. nonfinancial sectors since the mid 1980s has been financed by foreign lending. Second, the collapse of the U.S. housing...

The majority of OECD countries has experienced a reduction in macroeconomic volatility during the last two decades. This period is also characterized by a gradual liberalization of the capital accounts in these countries. We first show that, on average, countries/periods with more open capital...

During the last three decades the stock of government debt has increased in most developed countries. During the same period international capital markets have been liberalized. In this paper we develop a two-country political economy model with incomplete markets and endogenous government...

The 2008-2009 US crisis is characterized by an unprecedented degree of international synchronization, as all other G7 countries experienced large contractions. The international synchronization of the recent crisis is not present in many of the previous US contractions. We study a two-country...

analysis shows that innovations that have allowed firms to issue equity more flexibly can plausibly account for the lower output volatility together with the higher volatility in the financial structure of firms.

Detailed macroeconomic data to accompany the article in the Review of Economic Dynamics

We study the optimal long-term contract offered to workers when firms are financially constrained in their investment plans. To alleviate the tightness of the financial constraints, firms promise an increasing wage profile to workers, that is, they pay lower wages today in exchange of higher...

In this paper we study how credit shocks, that is, shocks affecting the ability to raise external funds for borrowers, affect macroeconomic fluctuations. A positive credit shock leads to a typical macroeconomic boom, with an expansion in consumption, investment, labor, output and productivity....