The paper studies under what conditions the value of the firm occasionally increases for a while before it suddenly drops, like a "bubble". We consider the environment where the trend of net cash flow from a firm's production depends on uncertain quality of a manager, and the manager is...

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities, explicitly incorporating the zero bound on the short-term nominal interest rate. Within this framework, we ask: Can a shock to the liquidity of private paper lead to a collapse in short-term...

After liberalizing international transactions of financial assets, many countries experiencelarge swings in asset prices, capital flows, and aggregate production. This paper studies howthe adjustment to capital account liberalization depends upon the degree of development of adomestic financial...

We study theoretically how the adjustment to liberalization of international…nancial transaction depends upon the degree of domestic …nancial development.Using a model with domestic and international borrowing constraints, we showthat, when the domestic …nancial system is underdeveloped,...

After liberalizing international transactions of financial assets, many countries experience large swings in asset prices, capital flows, and aggregate production. This paper studies how the adjustment to capital account liberalization depends upon the degree of development of a domestic...