This paper explores the impact of credit market on the entrepreneurs and demand for credit in a credit constrained economy and the resultant impact on the capital flows. In standard trade models the capital flows across countries are explained as a result of the rate of return differentials due...

Two duopolists compete in price on the market for a homogeneous product. They can 'profile' consumers, i.e., identify their valuations with some probability. If both firms can profile consumers but with different abilities, then they achieve positive expected profits at equilibrium. This...

We examine the dynamic effects and empirical role of TFP news shocks in the context of frictions in financial markets. We document two new facts using VAR methods. First, a (positive) shock to future TFP generates a significant decline in various credit spread indicators considered in the...

This paper analyzes the effects of several policy instruments to mitigate financial bubbles generated in the banking sector. We augment a New Keynesian macroeconomic framework by endogenizing boundedly-rational expectations on asset values of loan portfolios and allow for interbank trading. We...

We explore the intertwined dynamics of asset prices and the macroeconomy in a Behavioural model of Credit Cycles (BCC) characterized by a credit friction à la Kiyotaki and Moore and heterogeneous expectations cum heuristic switching à la Brock and Hommes. This behavioural approach allows to...

Given that credit and insurance markets are imperfect, and given also that intra-household transfers, and much of the work a child does, are private information, the second-best policy uses a combination of need and merit based education awards, together with a mix of taxes on parental income,...

This paper studies the interactions between the structure of product demand, relative wages, and the allocation of economic activity across two sectors. The agrarian sector produces a homogeneous good and consists of informal firms employing adults and children. The modern sector produces a...

We quantify the impacts of droughts in New Zealand on the profitability of dairy, and sheep and beef farms. Using a comprehensive administrative database of all businesses in New Zealand, we investigate the impact of droughts on farm revenue, profits, return on capital, business equity, debt to...

We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that make external financing costly, the optimal contract between shareholders and employees involves some degree of risk sharing whereby bonus pay partially absorbs earnings shocks....

A pre-condition for employer learning is that signals at labor market entry do not fully reveal graduates’ productivity. I model various distinct sources of signal imperfection—such as noise and multi-dimensional types—and characterize their implications for the private return to skill...