---- Acknowledgements ----
We thank Fernando Alvarez, Tore Ellingsen, Ken French, Mikhail Golosov, David K. Levine, Guido Lorenzoni, Kazuhiko Ohashi, Vincenzo Quadrini, Alp Simsek, Andrei Shleifer, Javier Suarez, Warren Weber and seminar participants at Berkeley, Boston College, Columbia GSB, Darmouth, EIEF, Federal Reserve Board, Maryland, Minneapolis Fed, Ohio State, Richmond Fed, Rutgers, Stanford, Wesleyan, Wharton School, Yale, the ASU Conference on "Financial Intermediation and Payments", the Bank of Japan Conference on "Real and Financial Linkage and Monetary Policy", the 2011 SED Meetings at Ghent, the 11th FDIC Annual Bank Research Conference, the Tepper-LAEF Conference on Advances in Macro-Finance, the Riksbank Conference on Beliefs and Business Cycles at Stockholm and the 2nd BU/Boston Fed Conference on Macro-Finance Linkages for their comments. We also thank Thomas Bonczek, Paulo Costa and Lei Xie for research assistance. The usual waiver of liability applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.