Consumption and investment comove over the business cycle in response to shocks that permanently move the price of investment. The interpretation of these shocks has relied on standard one-sector models or on models with two or more sectors that can be aggregated. However, the same...

Gambling behavior can serve as an informative indicator of important household heterogeneity that is difficult to observe directly in data. We present, to the best of our knowledge, the first comprehensive study of the consumption and personal finance of gamblers using a nationwide...

The downturn in economic activity in the U.S. that began in December 2007 (as determined by researchers with the National Bureau of Economic Research) has been noticeably deeper and has already lasted considerably longer than the prior two recessions - those beginning in July 1990 and in March...

To predict the effects of the 2020 U.S. CARES act on consumption, we extend a model that matches responses of households to past consumption stimulus packages. The extension allows us to account for two novel features of the coronavirus crisis. First, during the lockdown, many types of spending...

How does financial integration impact capital accumulation, current-account dynamics, and cross-country inequality? This paper investigates this question within a two-country, general-equilibrium, incomplete-markets model that focuses on the importance of idiosyncratic entrepreneurial risk -- a...

We examine the optimal taxation of capital in a Ramsey setting of a general-equilibrium heterogeneous-agent economy with uninsurable idiosyncratic investment or capital-income risk. We prove that the ex ante optimal tax, evaluated at steady state, maximizes human wealth, namely the present...

We revisit the macroeconomic effects of government consumption in the neoclassical growth model when agents face uninsured idiosyncratic investment risk. Under complete markets, a permanent increase in government consumption has no long-run effect on the interest rate and the capital-labor...

In low-rate environments, policy strategies that involve holding rates "lower for longer" (L4L) may mitigate the effects of the effective lower bound (ELB). However, these strategies work in part by managing the public's expectations, which is not always realistic. Using the Fed's large-scale...

We develop a nonlinear dynamic general equilibrium model with a banking sector and use it to study the macroeconomic impact of introducing a minimum liquidity standard for banks on top of existing capital adequacy requirements. The model generates a distribution of bank sizes arising from...

We estimate the marginal propensity to consume (MPC) out of permanent and transitory shocks to house price appreciation. We consider two different models under which those shocks may affect consumption. In the first one, housing is a risky asset. In the second one, housing has a role as a...