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We study the effect of releasing public information about productivity or monetary shocks (for example, as a consequence of publishing an economic aggregate) using a micro-founded macroeconomic model where agents learn from the distribution of nominal prices. While a public release has the direct beneficial effect of providing new information , it can also(More)
This paper provides evidence of a causal and economically important effect of financial development on volatility. In contrast to the existing literature, the identification strategy is based on the differences in sensitivities to financial conditions across industries. The results show that sectors with larger liquidity needs are more volatile and(More)
We study the optimal tradeoff between commitment and flexibility in a consumption-savings model. Individuals expect to receive relevant information regarding tastes, and thus value the flexibility provided by larger choice sets. On the other hand, they also expect to suffer from temptation, with or without self-control, and thus value the commitment(More)
I propose an implementation of the q-theory of investment using bond prices instead of equity prices. Credit risk makes corporate bond prices sensitive to future asset values, and q can be inferred from bond prices. The bond market's q performs much better than the usual measure in standard investment equations. With aggregate data, the fit is three times(More)
We consider a general representation of the delegation problem, with and without money burning, and provide sufficient and necessary conditions under which an interval allocation is optimal. We also provide a partial characterization for cases were money burning is optimal. We apply our results to the theory of trade agreements among privately informed(More)
In this paper, we propose a tractable variant of the open economy neoclassical growth model that emphasizes political economy and contracting frictions. The political economy frictions involve disagreement and political turnover, while the contracting friction is a lack of commitment regarding foreign debt and expropriation. We show that the political(More)
Previous studies on the influence of weather on Aedes aegypti dynamics in Puerto Rico suggested that rainfall was a significant driver of immature mosquito populations and dengue incidence, but mostly in the drier areas of the island. We conducted a longitudinal study of Ae. aegypti in two neighborhoods of the metropolitan area of San Juan city, Puerto Rico(More)
Philip Lane for sharing with us their crosscountry data on foreign asset positions. Abstract Large and persistent global financial imbalances need not be the harbinger of a world financial crash. Instead, we show that these imbalances can be the outcome of financial integration when countries differ in financial markets deepness. In particular, countries(More)
We study the diffusion of dispersed private information in a large economy. We assume that agents learn from the actions of others through both a private channel, which represents learning from local interactions, and a public channel, which represents learning from prices. We show that the private and public channels of information diffusion generate(More)
We characterize optimal taxation of foreign capital and optimal sovereign debt policy in a small open economy where the government cannot commit to policy and seeks to insure a risk averse domestic constituency. The expected tax on capital is shown to vary with the state of the economy, generating cyclicality in investment and debt in an environment where(More)