Many compensation schemes consist of cash ̄ow streams with different risk characteristics. For example, bonuses, which help align a ®rm's wage bill with business cycle ̄uctuations, are more variable than regular (®xed) pay. We investigate empirical regularities in compensation schemes involving risky pay which is contingent on certain random outcomes. Using data for Germany, Japan and the US, w...

We study models of credit with limited commitment, which implies endogenous borrowing constraints. We show that there are multiple stationary equilibria, as well as nonstationary equilibria, including some that display deterministic cyclic and chaotic dynamics. There are also stochastic (sunspot) equilibria, in which credit conditions change randomly over time, even though fundamentals are dete...

We examine a general equilibrium model with collateral constraints and increasing returns to scale in production. The utility function is nonseparable, with no income e¤ect on the consumer’s choice of leisure. Unlike this model without a collateral constraint, we …nd that indeterminacy of equilibria is possible. Hence, business cycles can be driven by self-ful…lling expectations. This is the ca...

Real-business-cycle models rely on total factor productivity (TFP) shocks to explain the observed co-movement between consumption, investment and hours. However an emerging body of evidence identifies “investment shocks”as important drivers of business cycles. This paper shows that a neoclassical model consistent with observed heterogeneity in labor supply and consumption across employed and no...

In this paper the time series properties of the outcomes of two different specifications of a nonparametric productivity analysis are compared using data for threeand four-digit U.S. manufacturing industries over the period 1958-96. The first model is standard and does not account for variations of capacity utilization of the production factors whereas the second model does. Correcting for util...

This paper introduces dynamic predictor selection into a New Keynesian model with heterogeneous expectations and examines its implications for monetary policy. We extend Branch and McGough (2006) by endogenizing the fraction of rational versus adaptive agents along the lines of Brock and Hommes (1997). We show that models that are determinate under the assumption of full rationality may possess...

I investigate cointegrating relationships such that, even though the long-run attractors are assumed to be linear, the dynamics of the equilibrium errors depends on the business cycle. I postulate a Markov-switching common stochastic trends model to study both the short-run responses to permanent shocks and the e/ects of recessions in the long-run growth. I apply these 0ndings to explore the sh...

US federal transfers to individuals are large, countercyclical, vary geographically, and often credited with helping stabilize regional economies. This paper estimates the short-run effects of these using plausibly exogenous variation in temporary stimulus payments permanent Social Security benefit increases. States that received larger tended grow faster contemporaneously, a multiplier around ...

This article reviews the global health and economic consequences of 1918 influenza pandemic, with a particular focus on topics that have seen renewed interest because COVID-19. We begin by providing an overview key contextual epidemiological details as well data are available to researchers. then examine effects mortality, fertility, economy in short medium run. The role non-pharmaceutical inte...

We study a production economy with regime switching in the conditional mean and volatility of productivity growth. The representative agent has generalized disappointment aversion (GDA) preferences. We show that volatility risk in productivity growth carries a positive and sizable risk premium in levered equity. Our model can endogenously generate long-run risks in the volatility of consumption...