This paper presents a continuous‐time model of sovereign debt. In it, a relatively impatient sovereign government's hidden type switches back and forth between a commitment type, which cannot default, and an opportunistic type, which can, and where we assume outside lenders have particular...

We analyze a new class of equilibria that emerges when a central bank conducts monetary policy by setting an interest rate (as an arbitrary function of its available information) and letting the private sector set the quantity traded. These equilibria involve a run on the central bank's interest...

This paper considers an optimal taxation environment where household income is private information, and the government randomly audits and punishes households found to be underreporting. We prove that the optimal mechanism derived using standard mechanism design techniques has a bad equilibrium...

This paper argues that both unequal opportunity and social mobility are necessary implications of an efficient societal arrangement when incentives must be provided. Copyright 2006, Wiley-Blackwell.