We use equity as the traded primitive for a detailed analysis of systematic default risk. Default is parsimoniously represented by equity value hitting the zero barrier so that, unlike in reduced-form models, the explicit linkage to the firm's capital structure is preserved, but, unlike in...

This paper explores how interviews affect the matching process when worker productivity is private information. Wages are determined by a single round of strategic bargaining after the worker is interviewed. The implications of this hiring process for the efficiency of matching and the incidence...

This paper constructs a theoretical model that predicts, as observed in some currently developing countries, that the average school enrollment ratio may fall even when the average fertility rate declines. Unlike existing models, the current analysis indicates that economic growth may slow down...

This paper studies global stability of spatial configurations in a dynamic two-region model with quadratic adjustment costs where rational migrants make migration decisions so as to maximize their discounted future utilities. A global analysis is conducted to show that, except for knife-edge...

We show that, with endogenous investment, virtually all monetary policy rules that set a nominal interest rate in response solely to expected future inflation induce real indeterminacy in models with (i) staggered prices, (ii) staggered prices and staggered wages, and (iii) staggered prices,...

We derive microscopic foundations for a well-known probabilistic herding model in the agent-based finance literature. While the model is quite robust with respect to behavioral heterogeneity, the network structure describing the very feasibility of agent interaction turns out to have a crucial...

We propose an analytical approximation of the term structure of interest rates under general diffusion processes of the short-rate and state variables. A method of approximating conditional moments as the solution to a system of ordinary differential equations is applied to the pricing of bonds....

We analyze a symmetric n-firm Cournot oligopoly with a heterogeneous population of optimizers and imitators. Imitators mimic the output decision of the most successful firms of the previous round à la Vega-Redondo, F., [1997. The evolution of Walrasian behavior. Econometrica 65, 375-384]....

The present paper examines the effects of consumption externalities on economic performance in a one-sector model with wealth preference. The presence of the wealth preference generates a wealth effect in consumption growth, which plays a crucial role for consumption externalities to have...

Benhabib and Farmer [1996. Indeterminacy and sector specific externalities. Journal of Monetary Economics 37, 397-419] explore the possibility of local indeterminacy in a two-sector model with sector-specific externalities. They find that very small sector-specific externalities are sufficient...