The main objective of this work is to develop a general equilibrium business cycle model linking financial and real estate markets to the macroeconomy. The ability of a production economy to account simultaneously for asset pricing, business cycle and real estate market facts is then evaluated...

This paper studies the effects of imperfect risk-sharing between lenders and borrowers on commercial property prices and leverage. The key friction is that agents use different discount rates to evaluate future flows. Eliminating this pecuniary externality generates large reductions in the...

This article studies the asset pricing and the business cycle implications of habit formation in a production economy with capital adjustment costs and endogenous labor supply. A specification of internal habit in the mix of consumption and leisure which minimizes the wealth effect on labor...

How does contagion risk affect the business cycle? We find that the presence of contagion risk significantly alters the transmission of standard macroeconomic shocks. Relative to the first-best equilibrium, the contagion externality significantly reduces the response of output to a technology...

Almost two decades after the introduction of the common currency, differences in institutional frameworks remain a major source of cross-country heterogeneity in the eurozone. We develop a two-country model with incomplete international markets in which the availability of credit depends on the...

This paper studies the effects of money supply shocks in a general equilibrium model that reproduces a term premium of the magnitude observed in the data. In an environment where financial frictions are the main source of monetary non-neutrality, I find that money supply shocks are less...

This study augments the neoclassical growth model with a mechanism that creates a novel transmission channel through which financial shocks propagate to the real economy. By affecting agents' ability to finance consumption expenditures, financial frictions create a demand for safe assets that...

We introduce a specification of habit formation featuring non-separability between consumption and leisure into an otherwise standard New Keynesian model. The model can be estimated with standard Bayesian techniques and the bond pricing implications are evaluated using higher-order...

We develop a representative agent model of a production economy in order to explain the joint dynamics of house prices and equity returns. In a model generating costly business cycle fluctuations, we find that restrictions on housing supply have important implications for asset pricing. Together...

This article studies the asset pricing and the business cycle implications of habit formation in a production economy with capital adjustment costs and endogenous labor supply. A specification of internal habit in the mix of consumption and leisure which minimizes the wealth effect on labor...