In this paper, I compare a two-agent asset pricing model with the corresponding model with a continuum of agents. In a two-agent economy, interest rates respond to idiosyncratic income shocks because each agent represents half of the population. These interest rate effects facilitate consumption...

In this paper, I compare a two-agent asset pricing model with the corresponding model with a continuum of agents. In a two-agent economy, interest rates respond to because each agent represents half of the population. These interest rate effects facilitate consumption smoothing. An agent in a...

We investigate, by Monte Carlo methods, the finite sample properties of GMM procedures for conducting inference about statistics that are of interest in the business cycle literature. These statistics include the second moments of data filtered using the first difference and Hodrick-Prescott...

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 framework with a standard labor market matching friction and a friction in commodities markets which leads to firms not always selling everything being produced and thus to inventory accumulation. A savings glut can lead to a downward spiral in which reductions in consumer...

This paper analyzes the feedback between firms' hiring decisions and the demand for their products in an environment in which agents are poorly insulated from the financial consequences of unemployment. In such an environment, an increase in the risk of remaining unemployed for a long time...

This raises the question whether standard solution techniques such as linearization are accurate enough in those models in which enough volatility is generated. This paper shows that often this is not the case. When enough volatility is generated the non-linearities matter and both first-order...

This paper documents that debt and equity issuance are procyclical for most size-sorted firm categories of listed U.S. firms. The procyclicality of equity issuance decreases monotonically with firm size. At the aggregate level, however, the results are not conclusive. The reason is that issuance...

Investment in inventories is known to be important for observed changes in GDP. However, inventory investment and the possibility that firms may fail to sell all goods are typically ignored in business cycle models. Using US data, the ability to sell is shown to be strongly procyclical. By...