Recent estimates of the output Euler equation for the United States indicate that the elasticity of aggregate demand to interest rates is not significantly different from zero. We first argue that this result may hide a structural break: the estimated elasticity is a convolution of two...

This paper builds a framework for the analysis of macroeconomic fluctuations that incorporates the endogenous determination of the number of producers and products over the business cycle. Economic expansions induce higher entry rates by prospective entrants subject to irreversible investment...

Recent estimates of the output Euler equation for the United States indicate that the elasticity of aggregate demand to interest rates is not significantly different from zero. We first argue that this result may hide a structural break: the estimated elasticity is a convolution of two...

This paper builds a framework for the analysis of macroeconomic fluctuations that incorporates the endogenous determination of the number of producers and products over the business cycle. Economic expansions induce higher entry rates by prospective entrants subject to irreversible investment...

The distribution of money across households is much more similar to the distribution of financial assets than to that of consumption levels, even controlling for life-cycle effects. This is a puzzle for theories which directly link money demand to consumption, such as cash-in-advance (CIA),...

We construct a general equilibrium model with incomplete markets and borrowing constraints, in order to study the term structure of real interest rates. Agents are subject to both aggregate and idiosyncratic income shocks, which latter may force them into early portfolio liquidation whilst in...

This article identifies a new channel through which inflation affects the real economy. In a simple monetary model where agents face heterogenous income flows, it is proven that credit constraints create heterogeneity in money demand. Because of this heterogeneity, long run inflation affects the...

Financial crises are often associated with an endogenous credit reversal followed by a fall in asset prices and serious disruptions in the financial sector. To account for this sequence of events, this paper constructs a model where the excessive risk-taking of portfolio investors leads to a...

We study the macroeconomic implications of time-varying precautionary saving within a general equilibrium model with borrowing constraint and both aggregate shocks and uninsurable idiosyncratic unemployement risk. Our framework generates limited cross-sectional household heterogeneity as an...

We analyse the term structure of interest rates in a general equilibrium model with incomplete markets, borrowing constraint, and positive net supply of government bonds. Uninsured idiosyncratic shocks generate bond trades, while aggregate shocks cause uctuations in the trading price of bonds....