We extend the notion of competitive search equilibrium to an environment with adverse selection. Uninformed principals post contracts to attract informed agents. Agents observe the contracts and apply for one, trading off the probability of matching with a principal against the terms of trade...

and to increase the level of long term investment. In this case, partial integration opens up the opportunity for the occurrence of extreme events. That is, the cost of liquidity can become unusually high and the optimal consumption can display both higher volatility than in autarky and negative...

We explore this class of models for two reasons. The first is that it appears to capture many of the aspects often ascribed to fluctuations, the role of animal spirits in affecting demand---spirits that we interpret here as coming from a rational reaction to signals about the future---, the role...