We study the causes and the consequences of limited risk sharing in two areas macroeconomics: the transmission of international business cycles and the welfare effect of taxes. The first two chapters focus on international business cycles, since earlier work has shown that models with perfect...

The paper studies a fiscal policy instrument that can reduce fiscal distortions without affecting revenues,in a politically viable way. The instrument is a private contract (tax buyout), offered by the governmentto each citizen, whereby the citizen can choose to pay a fixed price in exchange for...

Using data from the Consumer Expenditure Survey we first document that the recent increase in income inequality in the US has not been accompanied by a corresponding rise in consumption inequality. Much of this divergence is due to different trends in within-group inequality, which has increased...

We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of the limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption...

The paper studies a fiscal policy instrument that can reduce fiscal distortions, without affecting revenues, in a politically viable way. The instrument is a private contract (tax buyout), offered by the government to each individual citizen, whereby the citizen can choose to pay a fixed price...

Currency crises are usually associated with large nominal and real depreciations. In some countries depreciations are perceived to be very costly (“fear of floating”). In this paper we try to understand the reasons behind this fear. We first look at episodes of currency crises in the 1990s...

We show how to decentralize constrained efficient allocations that arise from enforcement constraints between sovereign nations. In a pure exchange economy, these allocations can be decentralized with private agents acting competitively and taking as given government default decisions on foreign...

Over the period 1973-1985, the correlations of GDP, employment and investment between the United States and an aggregate of major trading partners were respectively 0.76, 0.67, and 0.61. Between 1986-1998 the same correlations were much lower: 0.25, -0.19, and 0.16 (real regionalization). At the...

Currency crises are usually associated with large nominal and real depreciations. In some countries depreciations are perceived to be very costly (‘fear of floating’). In this paper we try to understand the reasons behind this fear. We first look at episodes of currency crises in the 1990s...

The early 1980s marked the onset of two striking features of the current world macroeconomy: the fall in U.S. business cycle volatility (the ggreat moderationh) and the large and persistent U.S. external imbalance. In this paper, we argue that an external imbalance is a natural consequence of...