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...

We examine the role of collateral in a dynamic model of optimal credit contracts in which a borrower values both housing and non-housing consumption. The borrower's private information about his income is the only friction. An optimal contract is collateralized when in some state, some portion...

Is the standard hyperbolic-discounting model capable of robust qualitative predictions for savings behavior? Despite results suggesting a negative answer, we provide a positive one. We give conditions under which all Markov equilibria display either saving at all wealth levels or dissaving at...

We study a flexible dynamic savings game in continuous time, where decision makers rotate in and out of power. These agents value spending more highly while in power creating a time-inconsistency problem. We provide a sharp characterization of Markov equilibria. Our analysis proceeds by...

Using a model in which anticipations about the future determine current spending, we take a medium-frequency look at time series data around the Great Recession, the Great Depression, and the Japanese crisis of the 1990s. This leads us to highlight some common features of these three episodes:...