We develop a model of monetary exchange in over-the-counter (OTC) markets and use it to study the effects of inflation on asset prices, as well as on standard measures of financial liquidity, such as the size of bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy,...

This paper studies optimal disability and welfare benets with imperfect disability tagging. Labor supply is aected by the levels of both disability and welfare benets. The tagging process is implemented by social workers that may have some altruism toward claimants. All the individuals that are...

Nominal interest rates typically approach the zero-lower bound during a financial crisis. This is a constraint on optimal monetary policy: In a model with financial frictions, policy would set negative nominal interest rates in response to increases in credit spreads. We find that fiscal policy...

This paper models the dynamics of fundraising, campagin spending, and accumulation of war chest in the context of U.S. House elections. We structurally estimate the model using campaign finance data and vote share data from 1984 to 2004. A salient feature of U.S. Congressional Elections is that...

This paper analyzes the incentives to strategically default in a dynamic principal-agent model with hidden savings and one-sided limited commitment. The agent's outside option depends on the hidden savings, therefore the principal cannot observe the agent's incentives to default. The agent has a...

We study, empirically and theoretically, the flows from and to unemployment, and from job to job, and relate these to occupational mobility. We are also particularly interested in the cyclical patterns of these flows. Using the Survey of Income and Program Participation, we document patterns of...

This paper explores how banks' balance sheets and sovereign risk affect macroeconomic fluctuations jointly. The heightened sovereign risk and a potential default constrain the banks' ability to extend credit to firms. This happens through the capital requirement that limits the size of the bank...

This paper develops a simple model in which uncertainty about future tax policy leads to a temporary reduction in investment. The basic idea is that policy uncertainty creates uncertainty about the profitability of investment. If the uncertainty is likely to be resolved in the not-too-distant...

This paper presents a parsimonious equilibrium business cycle model with trade frictions in the product and labor markets. The model features unemployment and unsold production and its general equilibrium can be represented very simply: as the intersection of an aggregate supply and an aggregate...

Taking a look at sectoral macroeconomic data, this paper motivates the importance of (i) structural change, (ii) biased technical change and (iii) non-homotheticity of preferences. We provide a tractable theory of directed technical change where households have non-homothetic preferences and...