It is often argued that the provision of liquidity by the international institutions such as the IMF to countries experiencing balance of payment problems can have catalytic effects on the behavior of international financial markets, i.e., it can reduce the scale of liquidity runs by inducing...

This paper studies equilibrium selection in intertemporal coordination problems with delay options. The risk-dominant action of the underlying one-shot game is selected when frictions are arbitrarily small. Larger frictions introduce real option effects in the model and inhibit coordination.

Fundamental models of money, while explicit about the frictions that render money essential, are silent on how agents actually coordinate in its use. This paper studies this coordination problem, providing an endogenous map between the primitives of the environment and the beliefs on the...

This paper studies fiscal policy in a model of sovereign debt and default. A time inconsistency problem arises: since the price of past debt cannot be affected by current fiscal policy and governments cannot credibly commit to a certain path of tax rates, debtor countries choose suboptimally low...

Motivated by a novel stylized fact - countries with isolated capital cities display worse quality of governance - we provide a framework of endogenous institutional choice based on the idea that elites are constrained by the threat of rebellion, and that this threat is rendered less effective by...

It is often argued that the provision of liquidity by the international institutions such as the IMF to countries experiencing balance of payment problems can have catalytic effects on the behavior of international financial markets, i.e., it can reduce the scale of liquidity runs by inducing...