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We build a tractable New Keynesian model to study and compare four types of monetary and fiscal policy: policy rate adjustments, quantitative easing, lump-sum fiscal transfers and government spending. We find that tax-financed fiscal policy is more stimulative than debt-financed policy, and optimal policy coordination needs at least two of these four policy instruments.

The author proposes an arbitrage-free model of the joint behaviour of interest and exchange rates whose exchange rate forecasts outperform those produced by a random-walk model, a vector autoregression on the forward premiums and the rate of depreciation, and the standard forward premium regression.

Can regulation solve problems arising from a natural monopoly? This paper analyzes whether “unbundling,” referring to regulations that enforce sharing of natural monopolistic infrastructure, prevents entrants from building new infrastructure.

This paper studies the use of information for incentives and risk sharing in agency problems. When the principal is risk neutral or the outcome is contractible, risk sharing is unnecessary or completely taken care of by a contract on the outcome.

We study the cross-section of equilibrium returns on safe assets using a tractable asset pricing model with a micro-founded demand for liquidity and multiple safe assets with heterogeneous transaction costs. We test the main predictions of our theory using a novel measure of relative (in)convenience yields in the US Treasury market.

Should unemployment benefits be more generous during economic downturns? The optimal amount and duration of benefit payments ultimately depend on the demographic and wealth characteristics of benefit recipients.

From 1870 to 2000, the workweek length of employed persons decreased by 41 per cent in industrialized countries.

The magnitude and frequency of recent financial crises underscore the importance of understanding financial instability for the purpose of crisis prevention and crisis management.

We examine the role of debt in amplifying and propagating recessions. Firms’ debt adjustment makes recessions deeper but makes expansions gradual. In particular, when the aggregate business leverage is ten percentage points above average, the half-life of the recovery doubles.

Real rigidities are an important feature of modern sticky price models and are policy-relevant because of their welfare consequences, but cannot be structurally identified from time series. I evaluate the plausibility of capital specificity as a source of real rigidities using a two-dimensional generalized (s,S) model calibrated to micro evidence.