This paper studies the interaction between monetary and fiscal authorities while investors are coordinating on a speculative attack. The authorities want to achieve specific targets for output and inflation but also to avoid a regime change (i.e. sovereign default). They use the traditional...

The recent economic and financial crisis has drawn attention to how mutual guarantee institutions (MGIs) facilitate small and medium enterprises in accessing bank financing. The aim of this paper is twofold. First, we describe the structural features of the Italian market for mutual guarantees...

We explore the role of expectations in second generation currency crisis models, proving that sudden shifts in speculators' beliefs can trigger currency devaluations, even without any sizable worsening in the fundamentals. In our incomplete information game, mean-preserving changes in...

In an economy where entrepreneurs with unequal "abilities" face alternative investment projects, which differ in degree of risk and productivity, we analyse the Nash equilibrium contracts arising from a banks-borrowers game in the context of asymmetric information. We show that, for a particular...

This paper extends some theoretical results of Morris and Shin (1998) concerning the role of uncertainty about fundamentals in currency crises and tests their empirical relevance using a novel approach based on the distribution of survey expectations. Econometric evidence from the Asian crisis...

This paper analyses the market for professional (expert) services where the experts are motivated by reputational concerns. A key feature of such markets, which is often overlooked, is that clients can have specific characteristics that affect their evaluation of the service, and (or) the...

In this paper I study two methods often used in public procurement to deal with the risk that the winning bidder may default on his bid: augmenting the standard first price auction with an ex-post verification of the responsiveness of the bids and using an average bid auction. I show that when...

This paper investigates the incentives of experts competing to influence decision making. Competition for influence is shown to have an ambiguous effect on truthtelling incentives and a decision maker might be better off relying on one source of information only. This result has important...

We develop a model which accounts for the observed equity premium and average risk free rate, without implying counterfactually high risk aversion. The model also does well in accounting for business cycle phenomena.

A growing number of studies on the US subprime market indicate that, due to asymmetric information, credit risk transfer activities have perverse effects on banks� lending standards. We investigate a large part of the market for securitized assets (�prime mortgages�) in Italy, a...