We develop a search-theory of asset liquidity which gives rise to endogenous financing constraints on investment in an otherwise standard dynamic general equilibrium model. Asset liquidity describes the ease of issuance and resaleability of private financial claims, which is the outcome of a...

Banks in the euro area typically hold a large amount of government debt in their bond portfolios, which are valued both for their low credit risk and high liquidity. During the sovereign debt crisis, these characteristics of government debt were severely impaired in stressed euro area countries....

We endogenize asset liquidity in a dynamic general equilibrium model with search frictions on asset markets. In the model, asset liquidity is tantamount to the ease of issuance and resaleability of private financial claims, which is driven by investors' participation on the search market....

Estimating natural rate of unemployment (NAIRU) is important for understanding the joint dynamics of unemployment, inflation, and inflation expectation. However, existing literature falls short of endogenizing inflation expectation together with NAIRU in a model consistent way. We estimate a...

Recessions are often accompanied by spikes of corporate default and prolonged declines of business credit. This paper shows that credit and default cycles can result from variations of self-fullling beliefs about credit market conditions. We develop a tractable macroeconomic model in which...

We study economies where firms acquire capital in primary markets, then, after information on idiosyncratic productivity arrives, retrade it in secondary markets. Our secondary markets incorporate bilateral trade with search, bargaining and liquidity frictions. We distinguish between full or...