Most economic activity occurs in cities. This creates a tension between local increasing returns, implied by the existence of cities, and aggregate constant returns, implied by balanced growth. To address this tension, we develop a theory of economic growth in an urban environment. We show how...

Is increased competition in international financial markets desirable? On the one hand, reductions in mnopoly power can be efficiency improving. On the other, increased competition may make it hard to coordinate in disciplining debtors in default. This paper presents a model that formalizes this...

There is a large literature, including work by Hall (1997), Chari, Kehoe, and McGrattan (2002), Gali, Gertler, and Lopez-Salido (2002), and many others that has studied the gap between the household's static marginal rate of substitution condition (MRS) between consumption and leisure and the...