In a corporation with many small owners, it may not pay any one of them to monitor the performance of the management. We explore a model in which the presence of a large minority shareholder provides a partial solution to this free-rider problem. The model sheds light on the following questions:...

In the presence of aggregate demand spillovers, an imperfectly competitive firm's profit is positively related to aggregate income, which in turn rises with profits of all firms in the economy. This pecuniary externality makes a dollar of a firm's profit raise aggregate income by more than a...

In a January 2009 lecture on the financial crisis, Federal Reserve Chairman Bernanke advocated a new Fed policy of credit easing, defined as a combination of lending to financial institutions, providing liquidity directly to key credit markets, and buying of long term securities. We show that...

Fire sales are forced sales of assets in which high-valuation bidders are sidelined, typically due to debt overhang problems afflicting many specialist bidders simultaneously. We overview theoretical and empirical research on asset fire sales, which shows how they can arise, how they can lead to...