In existing unemployment insurance programmes, it is standard to condition eligibility on the previous employment record of unemployed workers. The purpose of this article is to study conditions under which the efficient contract exhibits these properties. In order to do so, we characterize the...

The paper analyzes optimal policy in a simple small open economy model with price setting frictions. In particular, the paper studies the optimal response of the nominal exchange rate following a terms-of-trade shock. The paper departs from the New Keynesian (NK) literature in that it explicitly...

When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as...

When the zero lower bound on nominal interest rates binds, monetary policy cannot provide appropriate stimulus. We show that in the standard New Keynesian model, tax policy can deliver such stimulus at no cost and in a time-consistent manner. There is no need to use inefficient policies such as...

We study a model with heterogeneous producers that face collateral and cash-in-advance constraints. These two frictions give rise to a nontrivial financial market in a monetary economy. A tightening of the collateral constraint results in a recession generated by a credit crunch. The model can...

Shielding the Poor presents a group of studies on social protection in the developing world from leading researchers. These studies address the issue of vulnerability of the poor to adverse shocks and propose policies to increase their protection and coping capacity. The studies emphasize the...

This paper studies the short run correlation of inflation and money growth. We study whether a model of learning does better or worse than a model of rational expectations, and we focus our study on countries of high inflation. We take the money process as an exogenous variable, estimated from...

Introducing bounded rationality into a standard consumption based asset pricing model with a representative agent and time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns and thereby excess volatility, persistence of...

We study a standard consumption based asset pricing model with rational investors who entertain subjective prior beliefs about price behavior. Optimal behavior then dictates that investors learn about price behavior from past price observations. We show that this imparts momentum and mean...

We study a model with heterogeneous producers that face collateral and cash in advance constraints. These two frictions give rise to a non-trivial financial market in a monetary economy. A tightening of the collateral constraint results in a credit-crunch generated recession. The model can...