Emerging market economies, which have much of their growth ahead of them, run persistent current account deficits in order to smooth consumption intertemporally. The counterpart of these deficits is their dependence on capital inflows, which can suddenly stop. In this paper we develop and...

Does heterogeneity matter for asset pricing and in particular for risk premiums? Starting with an irrelevance result, I classify the literature into two groups of papers taking different routes to link investor heterogeneity and risk premiums. The first group contains models of investors who...

Retirement benefit guarantees can ensure a minimum standard of living in retirement. I propose a framework to discuss the design of such guarantees. The model features a standard life-cycle setting, in which individual agents' choices can have negative external effects on public finances,...

The termination of a representative financial firm due to excessive leverage may lead to substantial bankruptcy costs. A government in the tradition of Ramsey (1927) may be inclined to provide transfers to the firm so as to prevent its liquidation and the associated deadweight costs. It is shown...

A firm's termination leads to bankruptcy costs. This may create an incentive for outside stakeholders or the firm's debtholders to bail out the firm as bankruptcy looms. Because of this implicit guarantee, firm shareholders have an incentive to increase volatility in order to exploit the...

Young firms' contribution to aggregate employment has been underwhelming. However, a similar trend is not apparent in their contribution to aggregate sales or aggregate stock market capitalization. We study the implications of the arrival of "low marginal - high average" revenue-product-of-labor...

We study the corporate-loan pricing decisions of a major Greek bank during the Greek financial crisis. A unique aspect of our dataset is that we observe both the interest rate and the "breakeven rate" of each loan, as computed by the bank's own loan-pricing department (in effect, the loan's...

We develop a tractable asset-pricing framework characterized by imperfect risk sharing among cohorts, who experience different levels of integrated life-time endowments. While all asset-pricing implications stem from the heterogeneity of consumption among investors, cross-sectional measures of...

For a firm that cannot raise external funds, cash on hand serves as precautionary saving. We derive a closed-form expression for the target level of cash on hand in the presence of persistent cash flows. Contrary to conventional wisdom, a mean-preserving increase in the volatility of cash flow...

Social policy to limit interactions can slow the spread of infection, but this benefit comes at the cost of reduced output. We solve an optimal control problem to choose the degree of interaction to maximize an objective function that rewards output and penalizes excess deaths. Optimal policy...