During financial disruptions, marketmakers provide liquidity by absorbing external selling pressure. They buy when the pressure is large, accumulate inventories, and sell when the pressure alleviates. This paper studies optimal dynamic liquidity provision in a theoretical market setting with...

We build a partial equilibrium model of firm dynamics under exchange rate uncertainty. Firms face idiosyncratic productivity shocks and observe the current level of the real exchange rate each period. Given their current level of capital stock, firms make their export decisions and choose how...

Personal taxation can be an important determinant of corporate investment and financing decisions if the marginal investor is taxed. I develop a dynamic capital budgeting model under realization-based capital gains taxation that highlights distinct cross-sectional and time-series implications....

This paper studies portfolio choice and asset prices in a model with two consumption goods, one of which involves a commitment in that its consumption can only be adjusted at a cost. Commitments effectively make investors more risk averse: they invest less in risky assets and smooth total...

In a closed economy general equilibrium model, Hopenhayn and Rogerson (1993) find large welfare gains to removing firing restrictions. We explore the extent to which international trade alters this result. When economies trade, labor market policies in one country spill over to other countries...

We consider a two-sided, finite-horizon model of search and matching with heterogeneous types and complementarity between types. The quality of the pool of potential matches deteriorates as agents who have found mutually agreeable matches exit the market. With automatic participation of all...

This paper uses panel data on household consumption and income to describe the transmission of income inequality into consumption inequality. We do this by contrasting shifts in the cross-sectional distribution of income growth with shifts in the cross-sectional distribution of consumption...

In this paper we ask a question whether a prolonging of entitlement to unemployment benefits that happened in the mid 80s can explain the unusual increase in unemployment rates of unskilled and old workers. To answer this question we estimate a version of Burdett-Mortensen model of search...

When the government must decide not only on road public-policy programs (like investment in infrastructure) but also on the provision of group-specific public goods (like regional transfers or subsidies), dynamic strategic inefficiencies arise. I present a model where the struggle between...