We develop an equilibrium model of the debt maturity choice of firms, in the presence of fixed issuance costs in the primary debt market, and search frictions in the secondary debt market. Liquidity in the secondary market is related to the ratio of buyers to sellers, which is determined in...

We model the debt maturity choice of firms in the presence of fixed issuance costs in the primary market and search frictions in the secondary market for debt. In the secondary market, short maturities improve the bargaining position of sellers, which reduces the required issuance yield. Long...

We analyse a model of financial intermediation in which intermediaries are subject to moral hazard and they do not invest socially optimally, because they ignore the systemic costs of failure and, in the case of banks, because they fail to account for risks which are assumed by the deposit...