We document the real business cycle properties of foreign aid to poor countries. We show that aid exhibits the following empirical regularities over a twenty-five year period. First, it represents a significant source of income for the recipients. Second, it is very volatile - two to three times...

In this paper we present a simple theory-based measure of the variations in aggregate economic efficiency: the gap between the marginal product of labor and the household’s consumption/leisure tradeoff. We show that this indicator corresponds to the inverse of the markup of price over social...

I develop an overlapping-generations framework in which changes in lending standards generate endogenous cycles. In my economy, entrepreneurs who are privately informed about the quality of their projects need to borrow funds. Intermediaries screen entrepreneurs both through the amount of...

Recent sovereign defaults are accompanied by interest rate spikes and deep recessions. This paper develops a small open economy model to study default risk and its interaction with output and foreign debt. Default probabilities and interest rates depend on incentives for repayment. Default is...

Two modifications are introduced into the standard real-business-cycle model: habit preferences and a two-sector technology with limited intersectoral factor mobility. The model is consistent with the observed mean risk-free rate, equity premium, and Sharpe ratio on equity. In addition, its...

This paper demonstrates endogenous fluctuations of aggregate investments when firm-level investments follow an (S,s) policy and exhibit strategic complementarity. We present a method to characterize the aggregate fluctuations that arise from the interaction of the (S,s) policies. A closed-form...

This paper investigates how some intrinsic uncertainty will affect the existence of sunspot equilibria and deterministic cycles in a simple overlapping generations model. In the model, there exists an intrinsic uncertainty under which each individual independently has a small probability of...

Until present, Romanian real estate market doesn’t affect much by U.S. housing and financial crisis. Though, considering the ongoing globalization process Romania simply can not avoid risks coming from the interaction of its own economy with the other ones. More or less, sooner or later, the...

This paper analyzes how those global shocks as foreign business cycles and exchange rate realignments affect the Japanese economy and whether there are structural changes in the transmission mechanism of these shocks in the recent period by using a VAR model. This paper finds that, since the...