state and regulators are not necessarily independent. Among other things, we show that firms invest more, issue more debt …

leveraged banks’ precautionary demand for liquidity. When adverse asset shocks materialize, a bank’s ability to roll over debt …

I analyze how lack of commitment affects the maturity structure of sovereign debt. Governments balance benefits of …-term debt affects default and rollover decisions by subsequent policy makers. The equilibrium maturity structure is shaped by … revenue losses on inframarginal units of debt that reflect the price impact of these decisions. The model predicts an interior …

aggressive', in which case they accept negative-NPV projects. In the first case, the uniquely optimal security is debt. In the … second case, it is levered equity. Debt maximizes lenders’ payoffs from financing low-NPV projects, i.e., projects that have … that are relatively likely to break even are financed with debt, while less profitable projects are financed with equity …

economic exchanges since they face the possibility that debt default might also spill over to hinder their non …

market. Unpredictable inflation makes debt most costly when income is the most needed by debtors (since when the ex post real …