We investigate a two-country model of real business cycles along the lines of Backus, Kehoe, and Kydland (1992) with one new feature: country one residents are ambiguous [along the lines of Epstein (2001)] about the productivity shocks of country two and vice versa. The model is calibrated and...

This paper explores equilibrium theory of wealth accumulation and wealth inequality when entrepreneurs have collateral constraints and are subject to idiosyncratic productivity shocks. The model is an extension of Kiyotaki-Moore's setting to incorporate shocks and, at the same time, is a version...

Many argue that the intrinsic uselessness of fiat money makes ``coordination'' an essential part of monetary theory: consumers could all equally well coordinate on believing that fiat money has no value. The coordination view suggests, however, that many transactions patterns are in fact...

We seem to observe different patterns of exchange at different times and in different places. The first goal of this paper is to develop a model of money as a medium of exchange which allows multiple transaction patterns. A dynamic version of Shubik’s trading post economy is used, and it is...

Under the hypothesis that aggregate U.S. consumption is random and, more importantly, viewed as ambiguous by consumers, we examine the implications for asset prices and for how consumption fluctuations influence consumer welfare. We consider a simple, Mehra–Prescott-style endowment economy...