This paper explores the valuation channel of external adjustment in a two-country dynamic stochastic general equilibrium model (DSGE) with international equity trading. The theoretical model we set up matches key moments of the data for the United States at business cycle frequency at least as...

We consider sufficient conditions for uniqueness in two-sided matching models with transfers. We analyse the strategy-proofness of allocation mechanism

We study a model of efficient risk sharing between two agents, A and B, who enjoy a non-durable common good. Only agent B can provide the common good whereas agent A can merely contribute indirectly by making transfers to the provider, agent B. We consider self-enforcing equilibria in the...

This paper addresses the question of whether goods or asset market frictions are necessary to explain the failure of consumption risk sharing across countries. I present a multi-country DSGE model with Armington specialization. There are iceberg costs of shipping goods across countries. In asset...

We study banking policy credibility in a variant of the Diamond and Dybvig (JPE, 1983) model. By committing to temporarily close banks during a run, suspending the convertibility of deposits into currency, the banking authority can eliminate the possibility of a bank run as an equilibrium...

Consumer prices are not very responsive to movements in nominal exchange rates and their response has fallen considerably in Canada since the mid 1980s. This paper explores two of the most likely explanations for this decline in exchange rate pass-through to consumer prices: (1) lower inflation...

This paper develops an agency model of executive compensation in dynamic industry equilibrium. Firms differ in the quality of their products, and managers can make a difference as higher effort brings about product improvement. I show that there is an inverse relationship between the magnitude...

We argue that labor mobility does not lead to a ''race to the bottom,'' where countries drastically cut redistributive transfers in order to attract skilled workers. The basis of our argument is that these cuts are not credible policies. We propose a two country model where competition for...

This paper studies the following problem. An agent takes actions based on a possibly misspecified model. The agent is 'large', in the sense that his actions influence the model he is trying to learn about. The agent is aware of potential model misspecification and tries to detect it, in...

This paper provides a general framework for pricing of real options in continuous time for wide classes of payoff streams that are functions of Levy processes. As applications, we calculate the option values of multi-stage investment/disinvestment problems (sequences of embedded options, which...