We study the pro-competitive gains from international trade in a quantitative model with endogenously variable markups. We find that trade can significantly reduce markup distortions if two conditions are satisfied: (i) there is extensive misallocation and (ii) opening to trade exposes hitherto...

In standard global games, individual behavior is optimal if it constitutes a best response to agnostic - Laplacian - beliefs about the aggregate behavior of other agents. This paper considers a standard binary action global game augmented with noisy signaling by an informed policy-maker and...

We study the gains from trade in a model with endogenously variable markups. We show that the pro-competitive gains from trade are large if the economy is characterized by (i) extensive misallocation, i.e., large inefficiencies associated with markups, and (ii) a weak pattern of cross-country...

This paper develops a consumption-based asset pricing model to explain and quantify the aggregate implications of a frictional financial system, comprised of many financial markets partially integrated with one-another. Each of our micro financial markets is inhabited by traders who are...

Recessions appear to be times when markets function less efficiently. This phenomenon has been the domain of theories that rely on changes in preferences (demand shocks) or constraints on price-setting (sticky prices). In our simple model of decentralized trade with asymmetric information,...

We exposit the link between money, velocity and prices in an inventory-theoretic model of the demand for money and explore the extent to which such a model can account for the short-run volatility of velocity, the negative correlation of velocity and the ratio of money to consumption, and the...