Credit subsidies in targeted industrial sectors or geographical areas are a primary mechanism of industrial and redistributive policy throughout the world. Using a unique panel of bank-firm relationships, we study the impact of interest-rate subsidies on the total amount of borrowing and on the...

We propose a framework for analyzing transformations of demand. Such transformations frequently stem from changes in the dispersion of consumers` valuations, which lead to rotations of the demand curve. In a wide variety of settings, profits are a U-shaped function of dispersion. A high level of...

We model the interaction between two economies where banks exhibit both adverse selection and moral hazard and bank regulators try to resolve these problems. We find that liberalising bank capital flows between economies reduces total welfare by reducing the average size and efficiency of the...

What is the relationship between entrepreneurial saving practices and reinvestment?  We develop a model of entrepreneurial finance and show that entrepreneurial reinvestment decisions depend on the efficiency of saving practices.  Utilizing a novel micro & small enterprise survey from Tanzania...

This paper studies the contracting problem between banks and their bankers, embedded in a competitive labour market for banker talent.  To motivate effort banks must use some variable remuneration.  Such remuneration introduces a risk-shifting problem by creating incentives to inflate early...

Shipping goods internationally is risky and takes time.  To allocate risk and to finance the time gap between production and sale, a range of payment contracts is utilized.  I study the optimal choice between these payment contracts and their implications for trade.  The equilibrium contract...

This study outlines a new theory linking industrial structure to optimal employment contracts and value reducing risk taking.  Firms hire their executives using optimal contracts derived within a competitive labour market.  To motivate effort firms must use some variable remuneration.  Such...

We develop a model in which cash-constrained entrepreneurs seek a venture capitalist (VC) to finance a new firm. Costly monitoring is employed by VCs to reduce entrepreneurial moral hazard. When monitoring reveals poor performance, VCs want to punish the entrepreneur with liquidation. However,...

This paper proposes a measure of financial fragility that is based on economic welfare in a general equilibrium model calibrated against UK data. The model comprises a household sector, three active heterogeneous banks, a central bank/regulator, incomplete markets, and endogenous default. We...

We present a model of cash constrained entrepreneurs who need an investor to finance their project. Investors can either be uninformed, such as individual bondholders, or informed, such as venture capitalists and banks. There is an entrepreneurial moral hazard problem, which can be partially...