In this paper, we put forward a theory of the optimal capital structure of the firm based on Jensen's (1986) hypothesis that a firm's choice of capital structure is determined by a trade-off between agency costs and monitoring costs. The problem of determining the optimal capital structure of...

We augment a standard global coordination game along the lines of Morris and Shin (1998) by an asset market where prices are determined in a noisy Rational Expectations Equilibrium. We study the implications of information aggregation through prices for equilibrium selection arguments in global...

If borrowing capacity of indebted households is tied to the value of their home, house prices should enter a correctly specified aggregate Euler equation for consumption. I develop a simple two-agent, dynamic general equilibrium model in which home (collateral) values affect debt capacity and...

We investigate a two-country model of real business cycles along the lines of Backus, Kehoe, and Kydland (1992) with one new feature: country one residents are ambiguous [along the lines of Epstein (2001)] about the productivity shocks of country two and vice versa. The model is calibrated and...

We model a dynamic limit order market as a stochastic sequential game. Since the model is analytically intractable, we provide an algorithm based on Pakes McGuire (2001) to find a stationary equilibrium, we generate artifical time series and perform comparative dynamics. As we know the data...

Three of the most important recent facts in global macroeconomics — the sustained rise in the US current account deficit, the stubborn decline in long run real rates, and the rise in the share of US assets in global portfolio — appear as anomalies from the perspective of...