The rapid growth of the US financial sector has driven policy debate on whether it is socially desirable. I propose a heterogeneous agent model with asymmetric information and matching frictions that produces a tradeoff between finance and entrepreneurship. By becoming bankers, talented...

The rapid rise of Chinese exports over the past two decades has raised concerns for manufacturing employment in high-income countries. Spill-overs beyond manufacturing are an important issue given the large size of the non-traded sector in modern economies and household imperfect spatial...

This paper studies the role of exit from a monetary union during a debt crisis. A monetary union, such as the European Monetary Union, needs to establish a procedure for exit as a tool to cope with debt default. The paper studies various forms of exit and argues that “Euroization” is both a...

We evaluate the impact on crime of a localized policing experiment that depenalized the possession of small quantities of cannabis in the London borough of Lambeth. Such a policy can: (i) impact the demand for cannabis in Lambeth as users move there to purchase cannabis; (ii) enable the Lambeth...

This paper analyzes a class of competitive economies with production, incomplete financial markets, and agency frictions. Firms take their production, financing, and contractual decisions so as to maximize their value under rational conjectures. We show that competitive equilibria exist and that...

Recent economic developments have shown the importance of spillover and contagion effects in financial markets. Such effects are not limited to relations between the levels of financial variables but also impact on their volatility. I investigate Granger causality in conditional mean and...