We propose a model where investors hire fund managers to invest either in risky bonds or in riskless assets. Some managers have superior information on the default probability. Looking at the past performance, investors update beliefs on their managers and make firing decisions. This leads to...

We develop a dynamic model of liquidity provision, in which hedgers can trade multiple risky assets with arbitrageurs. We compute the equilibrium in closed form when arbitrageurs' utility over consumption is logarithmic or risk-neutral with a non-negativity constraint. Liquidity is increasing in...

We develop a dynamic model of trading and investment with limited aggregate resources to study investment cycles. Unverifiable idiosyncratic investment opportunities imply market prices to play a role of rent distribution, distorting private investment incentives from a social point of view....

This paper explores price formation when sellers are privately informed both about their preferences and the quality of their asset. In equilibrium, sellers recognize that it will be harder to sell their asset at higher prices, while buyers recognize that they will get higher quality assets on...

We extend the concept of competitive search equilibrium to environments with private information, and in particular adverse selection. Principals (e.g. employers or agents who want to buy assets) post contracts, which we model as revelation mechanisms. Agents (e.g. workers, or asset holders)...

This paper constructs a model of non-balanced economic growth. The main economic force is the combination of differences in factor proportions and capital deepening. Capital deepening tends to increase the relative output of the sector with a greater capital share, but simultaneously induces a...

How do financial frictions affect the response of an economy to aggregate shocks? In this paper, we address this question, focusing on liquidity constraints and uninsurable idiosyncratic risk. We consider a search model where agents use liquid assets to smooth individual income shocks. We show...

In this paper, we begin by documenting substantial variation in house price growth across neighborhoods within a city during city wide housing price booms. We then present a model which links house price movements across neighborhoods within a city and the gentrification of those neighborhoods...

We develop a dynamic equilibrium model of asset markets affected by adverse selection. There exists a unique equilibrium where better assets trade at higher prices but in less liquid markets. Sellers of high-quality assets can separate because they are more willing to accept a lower trading...

We study the effects of a credit crunch on consumer spending in a heterogeneous-agent incomplete-market model. After an unexpected permanent tightening in consumers' borrowing capacity, some consumers are forced to deleverage and others increase their precautionary savings. This depresses...