We study an economy with a time-varying distribution of production to examine the role of debt in amplifying and propagating recessions. In our model, entrepreneurs use risky, long-term debt to finance capital. Liquid assets serve as collateral and transaction costs make debt illiquid. Debt...

We study an economy with a time-varying distribution of production to examine the role of debt in amplifying and propagating recessions. In our model, entrepreneurs use risky, long-term debt to finance capital. Liquid assets serve as collateral and transaction costs make debt illiquid. Debt...

We develop an equilibrium business cycle model where nonconvex delivery costs lead producers of final goods to follow generalized (S,s) inventory policies with respect to intermediate goods. When calibrated to match the average inventory-to-sales ratio in postwar U.S. data, our model reproduces...

We search for useful models of aggregate fluctuations with inventories. We focus exclusively on dynamic stochastic general equilibrium models that endogenously give rise to inventory investment and evaluate two leading candidates: the (S,s) model and the stockout avoidance model. Each model is...

Optimal monetary policy maximizes the welfare of a representative agent, given frictions in the economic environment. Constructing a model with two sets of frictions -- costly price adjustment by imperfectly competitive firms and costly exchange of wealth for goods -- we find optimal monetary...

We study efficient risk sharing in a model where agents operate linear production technologies with private information about idiosyncratic productivity. Capital is the sole factor of production, and accumulable. We establish a time-invariant, one-to-one mapping between the capital allocated to...

The authors develop a model of costly technology adoption where the cost is irrecoverable and fixed. Households must decide when to switch from an existing technology to a new, more productive technology. Using a recursive approach, the authors show that there is a unique threshold level of...

The authors examine a monetary economy where households incur fixed transactions costs when exchanging bonds and money and, as a result, carry money balances in excess of current spending to limit the frequency of such trades. As only a fraction of households choose to actively trade bonds and...

The authors study a model of lumpy investment wherein establishments face persistent shocks to common and plant-specific productivity, and nonconvex adjustment costs lead them to pursue generalized (S,s) investment rules. They allow persistent heterogeneity in both capital and total factor...