Replicating the degree of cross-country comovements of macroeconomic aggregates, dynamics of prices and quantities of international trade, and the behavior of consumption and labor remains an important challenge in international business cycle literature. This paper incorporates preference...

The paper investigates the notion that preference shocks play a central role in our understanding of the Great Depression. I identify a series of universally large negative shocks which destabilized the U.S. during the 1930s. When the artificial economy is paired with variable capital...

Data on consumption, earnings, wages and hours dispersion over the life cycle has been viewed as being at odds with an efficient allocation. We challenge this view. We show that a model with preference and wage shocks and full insurance produces the type of inequality patterns across age groups...

The life-cycle patterns of consumption, wage and hours inequality observed in U.S. cross-section data are commonly viewed as incompatible with a Pareto efficient allocation. We determine the extent to which these qualitative and quantitative patterns can or cannot be produced by Pareto efficient...

We econometrically estimate and test a consumption-based asset pricing model with stochastic internal habit. The model departs from existing deterministic internal habit models by introducing shocks to the coefficients in the distributed lag specification of consumption habit and consequently an...

This paper considers the ultimate causes of post-war UK business cycles. Using an extended stochastic growth model we construct estimates of a productivity and preference shock both of which are highly persistent, volatile and potentially capable of explaining UK business cycles. We find the...