We study the role of firm heterogeneity in affecting business cycle dynamics and optimal stabilization policy. Firms differ in their degree of cyclicality, and hence, exposure to aggregate risk, leading to firm-specific risk premia that influence resource allocations. The heterogeneous firm...

This paper studies the cross-country incidence of the 2008-2009 global crisis and documents a structural break in the way emerging economies responded to the global shock. Contrary to popular perceptions, emerging market economies suffered growth collapses comparable, or even larger, to those...

When limited commitment hinders unsecured credit, assets help by serving as collateral. We study models where assets differ in pledgability - the extent to which they can be used to secure loans - and hence liquidity. Although many previous analyses of imperfect credit focus on producers, we...

When limited commitment hinders unsecured credit, assets help by serving as collateral. We study models where assets differ in pledgability - the extent to which they can be used to secure loans - and hence liquidity. Although many previous analyses of imperfect credit focus on producers, we...

By studying the cross-country incidence of the 2008–2009 global financial crisis, we document a structural break in the way emerging economies responded to the global shock. Contrary to popular perceptions, emerging economies suffered growth collapses (relative to the pre-crisis levels)...