Smaller firms sell more equity in response to expansions than do larger firms. Also, consumption is more pro-cyclical for high income groups than others. In this paper, we present a model that captures key features of both of these patterns found in recent empirical studies. Managers own firms...

The global crisis that began in 2008 reheated the debate on market deregulation as a tool to spur economic performance. This paper addresses the consequences of increased flexibility in goods and labor markets for the conduct of monetary policy in a monetary union. We model a two-country...

We study optimal fiscal policy when product variety is endogenous and products are long-lived assets for firms. Depending on preferences, product creation should be either subsidized or taxed in the long run, by subsidizing or taxing dividends. In the most empirically relevant case, dividends...

This paper studies the domestic and international effects of financial deregulation in a dynamic, stochastic, general equilibrium model with endogenous producer entry. We model deregulation as a decrease in the monopoly power of financial intermediaries. We show that the economy that deregulates...

We study the efficiency properties of a dynamic, stochastic, general equilibrium, macroeconomic model with monopolistic competition and firm entry subject to sunk costs, a time-to-build lag, and exogenous risk of firm destruction. Under inelastic labor supply and linearity of production in...

This paper explores the valuation channel of external adjustment in a two-country dynamic stochastic general equilibrium model (DSGE) with international equity trading. The theoretical model we set up matches key moments of the data for the United States at business cycle frequency at least as...

We develop a stochastic, general equilibrium, two-country model of trade and macroeconomic dynamics. Productivity differs across individual, monopolistically competitive firms in each country. Firms face some initial uncertainty concerning their future productivity when making an irreversible...

To establish that our model is a reasonable description of the data we estimate the model using Bayesian methods and then evaluate its fit along a number of standard dimensions. The Bayesian approach to estimating the model parameters is especially important for providing discipline on the...

In this paper we study whether policy makers should wait to intervene until a financial crisis strikes or rather act in a preemptive manner. We study this question in a relatively simple dynamic stochastic general equilibrium model in which crises are endogenous events induced by the presence of...