We develop a dynamic nonlinear, noisy REE model of credit risk pricing un- der dispersed information that can theoretically and quantitatively account for the credit spread puzzle. The first contribution is a sharp analytical characteri- zation of the dynamic REE equilibrium and its comparative...

We analyze investment incentives and risk-taking by firms when equity markets aggregate information with noise. Noisy information aggregation drives a wedge between the expected social value and the market value of investments, inducing inefficient rent-seeking by incumbent shareholders and...

This paper studies the effect of reductions in information asymmetry - information globalization - on international risk sharing and trade flows. Information frictions are often invoked to explain low levels of international trade beyond those that measured trade frictions (tariffs,...

A recent literature explores many ways in which uncertainty shocks can have important economic effects. But how large are uncertainty shocks and where do they come from? Researchers typically estimate a model with stochastic volatility, using all available data, then condition on the estimated...