What happens when liquidity increases in credit markets and more funds are channeled from borrowers to lenders? We examine this question in a general equilibrium model where financial matchmakers help borrowers (firms) and lenders (households) search out and negotiate profitable matches and...

This paper looks at the outsourcing of research and development (Ramp;D) activities. We consider cost reducing Ramp;D and allow manufacturing firms to decide whether to outsource the project to research subcontractors or carry out the research in-house. We use a principal-agent framework and...

In a word, where information is costly, volatile cash flows create information acquisition costs that reduce value. Thus, managers act to reduce their firm's volatility of cash flow in anticipation of higher value for shareholders. However, when managers reduce the firm's cash flow volatility,...

Poor performance by the financial sector can be costly for society. On the other hand, a healthy banking sector has been thought by some to contribute to the growth of the economy. Recently, though, economists have begun to analyze new elements of the linkages between the financial and real...

Using evidence from seven hyperinflationary episodes in four Latin American countries in the second half of the 1980s, John Rogers and Ping Wang examine the causes and consequences of high inflation. The article emphasizes four issues: the welfare costs of inflation and real costs of...