This paper examines how durable goods and financial frictions shape the business cycle of a small open economy subject to shocks to trend and transitory shocks. In the data, nondurable consumption is not as volatile as income for both developed and emerging market economies. The simulation of...

Government support to banks through the provision of explicit or implicit guarantees affects the willingness of banks to take on risk by reducing market discipline or by increasing charter value. We use an international sample of bank data and government support to banks for the periods...

This paper considers the problem of optimal unemployment insurance (UI) in a repeated moral hazard framework. Unlike existing literature, unemployed individuals can secretly participate in a hidden labor market. This extension modifies the standard problem in three dimensions. First, it imposes...

Recently, Pissarides (2008) has argued that the standard search model with sunk fixed matching costs increases unemployment volatility without introducing an unrealistic wage response in new matches. We revise the role of matching costs and show that when these costs are not sunk and, therefore,...

Recently, Pissarides (2008) has argued that the standard search model with sunk fixed matching costs increases unemployment volatility without introducing an unrealistic wage response in new matches. We revise the role of matching costs and show that when these costs are not sunk and, therefore,...

Recently, Pissarides (2008) has argued that the standard search model with sunk fixed matching costs increases unemployment volatility without introducing an unrealistic wage response in new matches. We revise the role of matching costs and show that when these costs are not sunk and, therefore,...

We examine how much of the excess volatility of consumption puzzle in small open economies (Aguiar and Gopinath, JPE 2007) can be explained away by adding consumption of durable goods. Once we account for that, consumption is not as volatile as income for both developed and emerging market...

amplification mechanism in the labor market fluctuations. We first show evidence that suggests that when technological advances make equipment more expensive, not only investment and output decrease but also firms post fewer vacancies, hours worked are reduced and unemployment increases....

This paper studies the intergenerational persistence of work hours. In particular, I look at the correlation of hours between fathers and sons in the U.S. Using data from the Panel study of Income Dynamics, I find a strong persistence in the permanent component of hours worked. I investigate the...