I study unemployment insurance (UI) in general equilibrium with incomplete markets, search frictions, and nominal rigidities. An increase in generosity raises the aggregate demand for consumption if the unemployed have a higher marginal propensity to consume than the employed or if agents precautionary save in light of future income risk. This raises output and employment unless monetary policy raises the nominal interest rate. In an analysis of the U.S. economy over 2008–2014, UI benefit extensions had a contemporaneous output multiplier around 1. The unemployment rate would have been as much as 0.4 pp higher absent these extensions.

Greece experienced a boom until 2007, followed by a collapse of unprecedented magnitude and persistence. We assess the sources of the boom and the bust, using a rich estimated dynamic general equilibrium model. External demand and government consumption fueled the boom in production, whereas transfers fueled the boom in consumption. Different from the standard narrative, wages and prices declined substantially during the bust. Tax policy accounts for the largest fraction of the bust in production, whereas uninsurable risk accounts for the bust in consumption and wages. We assess how the composition of fiscal adjustment and bailouts affected the crisis.

We study the transmission of monetary policy through risk premia in a heterogeneous agent New Keynesian environment. Heterogeneity in households' marginal propensity to take risk (MPR) summarizes differences in portfolio choice on the margin. An unexpected reduction in the nominal interest rate redistributes to households with high MPRs, lowering risk premia and amplifying the stimulus to the real economy. Quantitatively, this mechanism rationalizes the role of news about future excess returns in driving the stock market response to monetary policy shocks and amplifies their real effects by 1.3–1.4 times.

We study a business cycle model of the international monetary system featuring a time-varying demand for safe dollar bonds, greater risk-bearing capacity in the United States than the rest of the world, and nominal rigidities. A flight to safety generates a dollar appreciation and decline in global output. Dollar bonds thus command a negative risk premium, and the United States holds a levered portfolio of capital financed in dollars. We quantify the effects of safety shocks and heterogeneity in risk-bearing capacity for global macroeconomic volatility, US external adjustment, and policy transmission, as of dollar swap lines.