We provide a disaster-based explanation for the failure of the CAPM in the post-Compustat sample as well as its success to explain the value premium in the long sample that includes the Great Depression. In an investment-based asset pricing model embedded with rare disasters, value stocks are...

Quantifying the gains from international trade is an area of research that has been widely studied using a variety of trade models. At the same time, it has been shown that non-homotheticities are useful for matching the systematic patterns of trade present in disaggregated trade data. We bring...

This paper studies the role of credit in the business cycle, with a focus on private credit overhang. Based on a study of the universe of over 200 recession episodes in 14 advanced countries between 1870 and 2008, we document two key facts of the modern business cycle: financial-crisis...

When the microeconomic adjustment underlying an aggregate variable is lumpy, conventional VAR procedures often imply less persistence than there really is. This is relevant for non-, semi- and structural models in macroeconomics. The extent to which persistence is underestimated decreases with...