Evidence of the statistical significance of profits in Q regressions remains one of the principal findings in the empirical investment literature. This result is frequently taken to support the view that capital market imperfections are an important element for understanding investment. This...

This paper explores the behavior of the U.S. economy during the interwar period from the perspective of a model in which the existence of non-convexities in the intermediation process gives rise to a multiplicity of equilibria. The resulting indeterminancy is resolved through a sunspot process...

This paper investigates the quantitative implications of two business cycle models in which aggregate fluctuations arise in response to variations in the process of financial intermediation. In the first, fundamental shocks in the capital accumulation process lead to fluctuations in the real...

We introduce equilibrium indeterminacy into a two-country incomplete asset model with imperfect competition and analyze whether self-fulfilling, belief-driven fluctuations (i.e., sunspot shocks) can help resolve the major puzzles of international business cycles. We find that a combination of...

We introduce equilibrium indeterminacy into a two-country incomplete asset model with imperfect competition to analyze the role of self-fulfilling expectations or beliefs in explaining international business cycles. We show that when self-fulfilling beliefs are correlated with technology shocks,...