<Para ID="Par1">Markets typically have many ways of learning about quality, with two of the most important being reputational forces and certification, and these types of learning often interact with and influence each other. This paper is the first to consider markets where learning occurs through these...</para>

We study financial stability with constraints on central bank intervention. We show that a forced reallocation of liquidity across banks can achieve fewer bank failures than a decentralized market for interbank loans, reflecting a pecuniary externality in the decentralized equilibrium....

Since the 2007-09 financial crisis, researchers have debated whether compensation plans drove excessive risk-taking or financial managers simply underestimated the risks of various investments. Through a principal-agent model with heterogeneous beliefs, we show that principals offer contracts...