This paper attributes the exchange-rate disconnect puzzle, which we characterize as the low adjusted R-squared in short-horizon predictive regressions, to omitted `third-country' variables. Using a three-country DSGE exchange rate model, we identify channels through which shocks originating in...

Among developed countries there are large and well-documented differences in earnings inequality and intergenerational earnings mobility. Public education financing systems are investigated as a possible source for these cross-country differences. This paper first documents facts about public...

We study first- and second-order subjective expectations (beliefs) in strategic decision-making. We propose a method to elicit probabilistically both first- and second-order beliefs and apply the method to a Hide-and-Seek experiment. We study the relationship between choice and beliefs in terms...

I present new empirical evidence on the relationship between the job flows, worker flows, and the time horizon at which these flows are measured. In particular, I show that worker flows grow linearly with the horizon at which they are measured; job flows grow approximately with the square root of...

In general, economic models of human development assume that mothers have rational expectations about the technology of skill formation, that is, about the process that determines how their offspring develop skills in socio-emotional and cognitive domains. This assumption implies that all women...

A large amount of recent research in macroeconomics emphasizes the role of uncertainty as a driver of business cycles, but the majority of this work takes uncertainty as exogenous. This paper proposes a model where aggregate uncertainty is endogenously time-varying through financial distress...

In a real business cycle model, an agent's fear of model misspecification interacts with stochastic volatility to induce time varying worst case scenarios. These time varying worst case scenarios capture a notion of animal spirits where the probability distributions used to evaluate decision...

This paper analyzes the impact of the 'one child policy' in China on its household saving behavior. First, it develops a life-cycle model with endogenous fertility, intergenerational transfers and human capital accumulation. We show a macroeconomic and a microeconomic channel of a fall in...

I study a dynamic model of matching between heterogeneous workers and heterogeneous jobs. Workers and jobs are attached to different labor markets, and within each labor market, workers and jobs are assigned to different locations, representing heterogeneity in the skills of workers and the...

The Great Recession of 2007-09 was preceded by sustained period of house price growth that ended in a large aggregate decline of house prices. Our paper evaluates quantitatively the extent to which changes in house prices can explain the drop in consumption witnessed during the Great Recession....