Changes in the stock of inventories are important for �fluctuations in aggregate output. However, the possibility that firms do not sell all produced goods and inventory accumulation are typically ignored in business cycle models. This paper captures this with a goods-market friction. Using US...

This paper develops a model according to which the costs of business cycles are nontrivial because they reduce the average level of output. The reason is an interaction between job creation costs and an agency problem. The agency problem triggers separations during economic downturns even though...

The US economy is still suffering from its most severe recession in seven decades. In the first of a series of US Election Analyses, Ethan Ilzetzki covers the key issue of taxes, spending and public debt, a major point of disagreement between the two candidates, President Obama and Governor Romney.