This paper uses the tools developed in the literature on dynamically incomplete markets with finite agents to study the large economy with a continuum of agents and both aggregate and idiosyncratic shocks in Krusell and Smith (1998). It establishes the existence of sequential competitive...

This paper develops a dynamic general equilibrium model with heterogeneous firms that face search complementarities in the formation of vendor contracts. Search complementarities amplify small differences in productivity among firms. Market concentration fosters monopsony power in the labor...

This paper evaluates the accuracy of a set of techniques that approximate the solution of continuous-time DSGE models. Using the neoclassical growth model I compare linear-quadratic, perturbation and projection methods. All techniques are applied to the HJB equation and the optimality conditions...

In this paper we analyze a hybrid small-scale New-Keynesian model with an arbitrary frequency of the agents' synchronized decision making. We study the impact of various demand and supply shocks on the dynamics of the model variables. We show that the corresponding impulse-response functions of...

In this paper we measure the welfare cost of fluctuations in a simple representative agent economy with nonclearing markets. The market friction we consider involves price rigidities and a voluntary exchange rationing scheme. These features are incorporated into an otherwise standard...

Capital adequacy regulations specify a minimum capital-to-assets ratio for banks in the economy. The effects of these regulations on the level of economic activity have not been thoroughly studied by the banking regulation literature. Specifically, the fact that as proposed by the Basle Accords,...

By simplifying the computational tasks and by providing step-by-step explanations of the procedures required to study a linear dynamic rational expectations (LDRE) model, this paper and the accompanying “LDRE Toolbox” of Matlab functions guide a researcher with almost no experience in...

This paper compares different solution methods for computing the equilibrium of dynamic stochastic general equilibrium (DSGE) models with recursive preferences such as those in Epstein and Zin (1989 and 1991) and stochastic volatility. Models with these two features have recently become popular,...

Value function iteration is one of the standard tools for the solution of dynamic general equilibrium models if the dimension of the state space is one ore two. We consider three kinds of models: the deterministic and the stochastic growth model and a simple heterogenous agent model. Each model...

Spanish Abstract: Teniendo como marco de referencia la “estrategia de inflación objetivo” es usual discutir lo que es m ́as conveniente para una sociedad en cuanto al grado de “dureza” o “agresividad” de una autoridad monetaria para defender su meta de inflación, y la credibilidad...