In this paper, we put forward a theory of the optimal capital structure of the firm based on Jensen's (1986) hypothesis that a firm's choice of capital structure is determined by a trade-off between agency costs and monitoring costs. The problem of determining the optimal capital structure of...

We put forward a theory of the optimal capital structure of the firm based on Jensen's (1986) hypothesis that a firm's choice of capital structure is determined by a trade-off between agency costs and monitoring costs. We model this tradeoff dynamically. We assume that early on in the production...

We put forward a theory of the optimal capital structure of the firm based on Jensen's (1986) hypothesis that a firm's choice of capital structure is determined by a trade-off between agency costs and monitoring costs. We model this tradeoff dynamically. We assume that early on in the production...

We put forward a theory of the optimal capital structure of the firm based on Jensen's (1986) hypothesis that a firm's choice of capital structure is determined by a trade-off between agency costs and monitoring costs. We model this tradeoff dynamically. We assume that early on in the production...

U.S. financial institutions have traditionally insured the typical U.S. household against persistent shocks to U.S. inflation through the U.S. mortgage market. The bond risk premium is effectively the price of long-run inflation risk insurance charged by these U.S. intermediaries. Starting in...

What a country has done in the past, and what other countries are doing in the present can feedback for good or for ill. We develop a model which can address hysteresis and contagion in sovereign debt markets. When a country's fundamentals change, those changes affect information acquisition...

This paper constructs a dynamic model of health insurance to evaluate the short- and long run effects of policies that prevent firms from conditioning wages on health conditions of their workers, and that prevent health insurance companies from charging individuals with adverse health conditions...

What determines the choice of technology within a country? While there could be many factors, the efficiency of the country's financial system may play a significant role. To address this question, a dynamic contract model is embedded into a general equilibrium setting with ompetitive...