Changes in country-specific aggregate volatility are positively correlated with the current account but negatively correlated with investment, output and credit flows. An International Real Business Cycle model with time-varying aggregate uncertainty, through a precautionary savings channel, can...

This paper proposes a tractable way to incorporate lending standards ("credit qualification thresholds") into macro models of financial frictions. Banks can reject borrowers whose risk is above an endogenous threshold at which no lending rate sufficiently compensates banks for the borrowers'...

This paper proposes a tractable way to incorporate lending standards ("credit qualification thresholds") into macro models of financial frictions. Banks can reject borrowers whose risk is above an endogenous threshold at which no lending rate sufficiently compensates banks for the borrowers’...

Transition risk - the financial stability risk related with decarbonization - is a major source of concern. The literature has so far only studied transition risk caused by carbon tax shocks. This paper explores other potential sources of transition risk: two other policy sources - subsidies to...

Ambitious climate policy, coupled with financial frictions, has the potential to create macrofinancial stability risk. Such stability risk may expand beyond the economy implementing climate policy, potentially catching other countries off guard. International spillovers may occur because of...

We study the hiring and firing decisions of a firm in a Dual Labor market and in a Single Labor Contract. Under both regulations, to fire before a certain seniority threshold is similar to an American option that gives the right of firing at low costs. However, the value of the option is...

This paper studies the role of housing markets in explaining recent current account dynamics. I document a strong negative correlation, both across and within countries, between housing and current account dynamics. Then, in a quantitative two-country model without exchange rate driven...

We analyze the removal of the credit-risk guarantees provided by the government-sponsored enterprises (GSEs) in a model with agents heterogeneous in income and house price risk. We find that wealth inequality increases, driven by higher mortgage spreads and housing rents. Housing holdings become...

This paper analyzes fertility and consumption decisions when the costs of raising a child and parents' income are stochastic and correlated. We model the decision to have a child similarly to the decision to exercise an option in finance literature. We obtain several new results relative to...