A large amount of recent research in macroeconomics emphasizes the role of uncertainty as a driver of business cycles, but the majority of this work takes uncertainty as exogenous. This paper proposes a model where aggregate uncertainty is endogenously time-varying through financial distress...

In France, firms with 50 employees or more face substantially more regulation than firms with less than 50. As a result, the size distribution of firms is visibly distorted: there are many firms with exactly 49 employees. We model the regulation as a sunk cost that must be paid the first time...

This paper analyzes a model where investors use a credit rating to decide whether to finance a firm. The rating quality depends on the credit rating agency's (CRA) effort, which is unobservable. We analyze optimal compensation contracts for the CRA that differ depending on whether the firm,...