We study optimal provision of unemployment insurance in a model where agents privately observe arrival of job opportunities and government’s ability to commit is imperfect. Imperfect commitment implies that full information revelation is generally suboptimal. Social welfare is convex in the probability with which agents reveal their private information. In the optimum, each agent is provided with incentives to either fully reveal his private information or not reveal it at all. The optimal contract can be decentralized by a joint system of unemployment and disability benefits in a way that resembles how these systems are used in practice.

We study the effects of central bank balance sheet policies—namely, quantitative easing and foreign exchange interventions—in a model where people form expectations through an iterative level-k thinking process. We emphasize two main theoretical results. First, under a broad set of conditions, central bank interventions are effective under level-k thinking, while they are neutral in the rational expectations equilibrium. Second, when preferences exhibit constant relative risk aversion, asset purchases increase aggregate output if they target assets with pro-cyclical returns but reduce it if asset returns are counter-cyclical. Finally, we empirically show that forecast errors about future asset prices are predictable by balance sheet interventions, a property that differentiates our channel from popular alternatives, such as portfolio-balance and signaling channels.

Does welfare improve when firms are better informed about the state of the economy and can thus better coordinate their production and pricing decisions? We address this question in an elementary business-cycle model that highlights how the dispersion of information can impede both kinds of decisions and, in this sense, be the source of both real and nominal rigidity. Within this context we develop a taxonomy for how the social value of information depends on the two rigidities, on the sources of the business cycle, and on the conduct of monetary policy.

We study the relationship between corporate income taxation and carbon dioxide (CO 2 ) emissions in the United States. We show CO 2 -intensive firms benefit more from the tax advantage of debt and pay lower income taxes on their capital income. Building on these new facts, we provide evidence that a cut in the corporate income tax rate leads to a larger expansion of clean firms. We develop a multisector general equilibrium model that accounts for our evidence and quantify the impact of corporate tax reforms on aggregate emissions. A policy that eliminates the tax advantage of debt could reduce aggregate emissions without affecting GDP.