We build a dynamic capital structure model to study the link between firms' systematic risk exposures and their time-varying debt maturity choices, as well as its implications for the term structure of credit spreads. Compared to short-term debt, long-term debt helps reduce rollover risks, but...

We show that time-varying risk premium in financial markets can explain a key yet puzzling feature of labor markets: the large differences in unemployment risk across worker age-groups over the business cycle. Our search model features a time-varying risk premium and learning about unobserved...

We present a theory in which limited risk sharing of idiosyncratic labor income risk plays a key role in determining the dynamics of interest rates. Our production-based model relates the cross-sectional distribution of labor income risk to observable aggregate labor market variables. Our model...

We build a dynamic capital structure model to study the link between systematic risk exposure and debt maturity, as well as their joint impact on the term structure of credit spreads. Our model allows for time variation and lumpiness in the maturity structure. Relative to short-term debt,...

We present a theory in which limited risk sharing of idiosyncratic labor income risk plays a key role in determining the dynamics of interest rates. Our production-based model relates the cross-sectional distribution of labor income risk to observable aggregate labor market variables. Our model...

We document several facts about corporate debt maturity: (1) debt maturity is pro-cyclical; (2) higher-beta firms tend to have longer debt maturity; (3) shorter maturity amplifies the sensitivity of credit spreads to aggregate shocks. We build a dynamic capital structure model that explains...

Ljungqvist and Sargent (2017) (LS) show that unemployment fluctuations can be understood in terms of a quantity they call the "fundamental surplus." However, their analysis ignores risk premia, a force that Hall (2017) shows is important in understanding unemployment fluctuations. We show how...

We present a theory in which limited risk sharing of idiosyncratic labor income risk plays a key role in determining the dynamics of interest rates. Our production-based model relates the crosssectional distribution of labor income risk to observable aggregate labor market variables. Our model...