This paper studies a discrete-time utility maximization problem of an infinitely-lived quasi-geometric consumer whose labour income is subject to uninsurable idiosyncratic productivity shocks. We restrict attention to a first-order Markov recursive solution. We show that under the assumption of the exponential utility function, the problem of the quasi-geometric consumer admits a closed-form so...

We propose and study properties of several estimators of variance decomposition in the local-projections framework. We find for empirically relevant sample sizes that, after being bias corrected with bootstrap, our estimators perform well in simulations. We also illustrate the workings of our estimators empirically for monetary policy and productivity shocks.

This paper explores the effects of monetary shocks on the allocation of factors of production. We analyze these effects when money plays a role in improving the timing of the transactions undertaken by entrepreneurs. Such improvement is facilitated by money’s important role in providing liquidity to entrepreneurs. Using a model in which production processes take time to mature and where credit ...

We extend the well-known fair wage-effort hypothesis to situations in which firms suffer from negative productivity shocks and test experimentally whether a fair employment hypothesis exists. The fair employment hypothesis stipulates that firms employ workers even if it is not profitable for them in the short run (after a negative productivity shock) in order to induce reciprocal behavior. Our ...

In this paper, we develop continuous-time methods for solving dynamic principal-agent problems in which the agent’s privately observed productivity shocks are persistent over time. We characterize the optimal contract as the solution to a system of ordinary differential equations and show that, under this contract, the agent’s utility converges to its lower bound—immiserization occurs. Unlike u...

This dissertation consists of three essays. In Chapter 1, we proposes a dynamic multi-sector production network model in which firms receive news on the future product-specific demand of a representative household. Since production takes time and firms in the production sectors are connected via input-output links, news on the future final demand of an individual product changes firms' forecast...

Recessions are times when markets function less efficiently. This phenomenon is usually the domain of theories that rely on changes in preferences (demand shocks) or constraints on price-setting (sticky prices). In our simple model of decentralized trade with asymmetric information, income dispersion measures uncertainty about buyer characteristics. Counter-cyclical income dispersion makes the ...

To generate big responses of unemployment to productivity shocks in a business cycle context or to productivity changes in a welfare state context, researchers have reconfigured matching models in various ways, e.g., by elevating the utility of leisure, by making wages sticky, by assuming alternating-offer wage bargaining, by introducing fixed matching costs, and the costly acquisition of credi...

The 2008-2009 US crisis is characterized by un unprecedent degree of international synchronization with all other G7 countries experiencing large contractions at almost the same time as the US. Another feature of the crisis is the sharp fall in US employment but not in US productivity. These two features—international synchronization and absence of significant productivity fall—are not present ...