With US trade and current account deficits approaching 6% of GDP, some have argued that the country is "on the comfortable path to ruin" and that the required "adjustment'' may be painful. We suggest instead that things are fine: although national saving is low, the ratios of household and...

In this paper, we show that within the set of stochastic three-period-lived OLG economies with productive assets (such as land), markets are necessarily sequentially incomplete, and agents in the model do not share risk optimally. We start by characterizing perfect risk sharing and find that it...

We study deviations from the Law-of-One-Price using microeconomic data on the retail prices of approximately 220 individual goods and services across 122 cities located in 79 countries over the period from 1990 to 2000.

We use cross sectional data on local currency prices of over 1800 goods across 13 European countries to examine deviations from the law of one price. We find that an average (across goods for a particular country) of ratios of foreign to domestic prices provides a surprisingly accurate...

By solving an incomplete-markets model of multiperiod bond pricing {\it backwards}, we show that the mean and autocorrelation properties of the term premiums in the yield curve can be a reflection of the temporal distribution of uninsurable income shocks, {\it i.e.}, the term structure of...