This paper investigates the quantitative implications of two business cycle models in which aggregate fluctuations arise in response to variations in the process of financial intermediation. In the first, fundamental shocks in the capital accumulation process lead to fluctuations in the real...

This paper provides empirical evidence on macroeconomic complementarities, a restriction on the nature of interaction between individuals in a multi-agent setting. These models imply that activities across agents will be positively correlated, that discrete decisions will be synchronized and...

This paper studies the dynamic properties of an imperfectly competitive economy with inventory holdings. In particular, we focus on the serial correlation in aggregate output and employment produced by the holding of inventories in one sector of the economy and the co-movement between sectors of...

This paper investigates the possibility of sunspots equilibria and endogenous cycles in an overlapping generations model with strategic interactions. We consider an economy with imperfectly competitive product markets. There is a participation decision on the part of prospective firms and a...

We analyze a financial collapse, such as the one which occurred during the Great Depression, from the perspective of a monetary model with multiple equilibria. The economy we consider contains financial fragility due to increasing returns to scale in the intermediation process. Intermediaries...

Evidence of the statistical significance of profits in Q regressions remains one of the principal findings in the empirical investment literature. This result is frequently taken to support the view that capital market imperfections are an important element for understanding investment. This...

Mankiw [1982] explores the Permanent Income Hypothesis implication that durable expenditures follow an ARMA(1,1) representation. He finds that durable expenditures are represented by an AR(1) process which implies that the rate of depreciation of durables, under the PIH model, is 100%. This...

This paper considers the importance of dynamic complementarities as an endogenous source of propagation in a dynamic stochastic economy. Dynamic complementarities link the stocks of human and organizational capital, which are influenced by past levels of economic activity, to current levels of...

The literature on inventory holdings stresses their role in smoothing production when costs are convex. Existing empirical evidence suggests that output is more variable than consumption so that production smoothing is not apparently present. One way of explaining this finding is to allow for...

This paper studies the dynamic optimization problem of a household when portfolio adjustment is costly. The analysis is motivated by the observation that on an annual basis, less than 71% of stockholders typically adjust their portfolio of common stocks. We use this, and related observations, to...