The standard procedure for analyzing transitional dynamics in non-linear macro models has been to employ linear approximations. Recently quadratic approximations have been explored. This paper examines the accuracy of these and higher-order approximations in an endogenous growth model with...

Mortgages are one-sided contracts under which the borrower may terminate the contract at any time, while the lender must commit to honoring the terms of the contract throughout its life. There are two aspects to this feature of the contract that are modeled in this paper. The first is that the...

This paper examines the incidence and welfare costs of inflation in the presence of financial market frictions and home production. The results suggest that financing constraints on firms' working capital expenditures significantly increase the welfare costs relative to the standard...