We construct a dynamic monopolistic competition model with heterogeneous firms to study the links between firms’ earnings volatility, the degree of financial constraints that they face, their survival probabilities, and their export market participation decisions. Our model predicts that more...

We introduce financial frictions in a two sector model of international trade with heterogeneous agents. The level of specialization in the economy (economic development) depends on the quality of financial institutions. Underdeveloped financial markets prohibit an economy to specialize in...

This paper examines the prevalence of mortgage arrears in the U.K using the British Household Panel Survey (BHPS). The majority of reported problems occur in the first few years after purchase. Episodes of unemployment, long-term sickness or relationship breakdown all predict repayment...

We consider a standard two—country environment, where one of the countries has rigid wages and unemployment, and analyze how factor markets’ integration affects the economy with respect to expectationsdriven fluctuations. We demonstrate that by allowing free capital mobility, indeterminacy...

This paper investigates the existence of liquidity constraints facing entrepreneurs in the United Kingdom. Using a household-level panel data set, entry to selfemployment is shown to be a function of household net worth. We use inheritances and unanticipated movements in house prices as...

We consider an (otherwise standard) New Neoclassical Synthesis theoretical framework that allows a role for money. Money in our model has an informational role which consists in facilitating the estimation of the unobserved shocks that drive potential output and thus the state of the economy....

This paper investigates racial disparities in household credit constraints using U.K. survey data. We find a widening disparity in the proportion of racial minority households reporting they face credit constraints compared with non-minority households over the period 2006-2009. By 2009 three...

In this paper, we use a panel of 609 UK firms over the period 1980-2000 to test for the existence of a trade credit channel of transmission of monetary policy, and for whether this channel plays an offsetting effect on the traditional credit channel. We estimate error-correction inventory...

Increasing wage inequality between similar workers plays an important role for overall inequality trends in industrialized societies. To analyze this pattern, we incorporate directed labor market search into a dynamic model of international trade with heterogeneous ï¬rms and homogeneous...

This paper presents a two-sector, two-country model showing that in ation in the housing market, a low personal savings rate, and a construction investment boom can contribute to a large current account decit. In the model, demand by a group of households in the domestic country is constrained...