We construct and calibrate a general equilibrium business cycle model with unemployment and precautionary saving. We compute the cost of business cycles and locate the optimum in a set of simple cyclical fiscal policies. Our economy exhibits productivity shocks, giving firms an incentive to hire...

Long-term debt contracts transfer aggregate risk from borrowing firms to lending banks. When aggregate shocks increase the future default probability of firms, banks are not compensated for the rising default risk of existing contracts. If banks are highly leveraged, this can lead to financial...

The book uses the methods of spectral analysis to establish a set of stylized facts concerning the cyclical properties of the most important economic aggregates of Germany and the US. To explain these stylized facts, a series of investment cycle models is developed and evaluated. Thereby, the...

Long-term debt contracts transfer aggregate risk from borrowing firms to lending banks. When aggregate shocks increase the future default probability of firms, banks are not compensated for the rising default risk of existing contracts. If banks are highly leveraged, this can lead to financial...