reasonable amount of aggregate volatility.

We examine the effects of long-lived nominal debt contracts in a quantitative business cycle model with financial frictions. In our setting, as in reality, firms fund themselves with a mix of nominal defaultable debt and equity securities to issue in every period. Debt is priced fairly taking...

In this paper we investigate the theoretical relation between financial leverage and stock returns in a dynamic world where both the corporate investment and financing decisions are endogenous. We find that the link between leverage and stock returns is more complex than the static textbook...

the consequences of this policy for economy-wide quantities such as investment and consumption. Contrary to conventional wisdom we find that changes in tax policy have only a small effect on equilibrium levels of corporate leverage. The intuition lies in the endogenous adjustment of debt prices...

cross-section, a strategy that is long on durables and short on services earns a sizable risk premium. In the time series, a strategy that is long on durables and short on the market portfolio earns a countercyclical risk premium. We develop an equilibrium asset-pricing model that explains these...

This paper investigates the role of financial market frictions on investment and the price of financial asset. We show that standard models with financial market imperfections can be summarized with a simple financing cost function, equal to the product of the financing premium and the amount of...

The surge in public debt triggered by the financial crisis has raised uncertainty about future tax pressure and economic activity. We contribute to the current fiscal debate by examining the asset pricing effects of fiscal policies in a production-based general equilibrium model in which...

We examine the asset pricing implications of innovation and R\&D in a stochastic model of endogenous growth. In equilibrium, R\&D endogenously drives a small, persistent component in productivity growth, in line with the data. These productivity dynamics induce long and persistent swings in...

When external finance is costly, liquid funds provide corporations with instruments to absorb and react to shocks. Making optimal use of liquid funds means transferring them to times and states where they are most valuable. We examine the determinants of corporate liquidity management in a...

The recent fiscal crisis in the EU and the slow-down of the BRICS countries have raised world-wide concerns about future global growth prospects. We examine the role of doubts about both local and foreign economic shocks by constructing an international endogenous growth model with technology...