This course covers three sets of topics. The first part will cover business cycle models with imperfect information. We will ask questions such as:

• What shocks drive business cycles?
• What is the relative role of shocks to fundamentals and shocks affecting expectations about (current and future) economic developments?
• How do informational frictions affect the shape of the responses to various shocks?

The second part will cover models of investment with credit constraints. We will ask questions such as:

• What is the transmission mechanism from shocks to the financial sector to the real economy?
• What determines optimal decisions about capitalization at the individual and at the social level?

The third part will cover search models of decentralized trade applied both to labor markets and to financial markets. In particular, the models will have informational imperfections.