We present an analytically tractable general equilibrium business cycle model that features micro-level investment lumpiness. We prove an exact irrelevance proposition which provides sufficient conditions on preferences, technology, and the fixed cost distribution such that any positive upper...

This paper introduces sectorial heterogeneity in TFPs in a growth model to generate new insights on trade, sectorial reallocation, and economic growth. The rate of overall economic growth in this model is a simple average of sectorial growth in a closed economy, but will depend on trade...

We propose a novel generalized recursive smooth ambiguity model which allows a three-way separation among risk aversion, ambiguity aversion, and intertemporal substitution. We apply this utility to a consumption-based asset pricing model in which consumption and dividends follow hidden Markov...