We analyse dynamic financial contracting under moral hazard. The ability to rely on future rewards relaxes the tension between incentive and participation constraints, relative to the static case. Managers are incited by the promise of future payments after several successes and the threat of...

We model the link between inequality and excessive risk taking. In the presence of increasing returns to tax avoidance, the middle class is willing to take non rewarded financial risk despite risk aversion. Electoral pressure may lead an incumbent politician to endorse this excessive risk taking...

We ask when currency carry trades are associated with destabilizing dynamics in the foreign exchange market, and investigate the role of monetary policy rules in setting of such dynamics. In a model where the exchange rate has a long-term fundamental anchor, we find that carry trades can be...