This paper provides a new framework to study the term structure of interest rate spreads and the maturity composition of sovereign bonds. As observed in the literature, sovereign interest rate spreads increase during crises, with short term interest rate spreads rising more than long term...

Currently U.S. firms hold record amounts of cash. The authors explore cross-sectional variation in cash holdings of U.S. publicly traded firms to shed light on the reasons for this recent trend. First, they identify factors that correlate with cash holdings and then examine the evolution of...

U.S. corporations are holding record-high amounts of cash. One reason has to do with taxes—both the uncertainty about future taxes and the reality of today’s tax rules. The second reason has to do with the rise of research and development; because of its uncertain nature, this sort of work...

When consumers can’t pay their credit card bills, they choose between delinquency and bankruptcy. A new economic model indicates that by changing the face value of delinquent debt, lenders can maximize repayment and make a difference in whether or not a household chooses bankruptcy.

A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment.

is characterized by countercyclical default risk. In this paper we develop a quantitative dynamic stochastic small open economy model with incomplete markets,endogenous fiscal policy and sovereign and private sector default where public expenditures and tax rates are optimally procyclical. The...

Consumer debt and bankruptcy are central issues today because of their explosive trends over the last 20 years in the U.S. economy. However, there is no convincing explanation for these facts. A drop in information costs, a potential cause, has not been evaluated mainly because there is no...

How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as intermediation spreads and the firm-size distribution for...

What determines the technology that a country adopts? While many factors affect technological adoption, the efficiency of the country's financial system may also play a significant role. To address this question, a dynamic contract model is embedded into a general equilibrium setting with...