This paper studies how a large increase in the price level is transmitted to the real economy through firm balance sheets. Using newly digitized macro- and micro-level data from the German inflation of 1919-1923, we show that inflation led to a large reduction in real debt burdens and...

Entrepreneurs face significant non-diversifiable business risks. We build a dynamic incomplete markets model of entrepreneurial finance to demonstrate the important implications of nondiversifiable risks for entrepreneurs' interdependent consumption, portfolio allocation, financing, investment,...

Intermediation capacity varies across dealers, and as a result, misallocation of credit risk reduces the risk-bearing capacity of the dealer sector and increases effective market-level risk aversion. When the efficient reallocation of credit risk within the dealer sector is impaired, interdealer...

Collective action is a dynamic process where individuals in a group assess over time the benefits and costs of participating toward the success of a collective goal. Early participation improves the expectation of success and thus stimulates the subsequent participation of other individuals who...

This article explores subjects in optimal income taxation characterized by recent research interest, practical importance in light of concerns about inequality, potential for misunderstanding, and prospects for advancement. Throughout, the analysis highlights paths for further investigation....

We study specialized lending in a credit market competition model with private information. Two banks, equipped with similar data processing systems, possess "general" signals regarding the borrower's quality. However, the specialized bank gains an additional advantage through further...

A sender sends a signal about a state to a receiver who takes an action that determines a payoff. A moderator can block some or all of the sender's signal before it reaches the receiver. When the moderator's policy is transparent to the receiver, the moderator can improve the payoff by blocking...

We model financial innovations such as Exchange-Traded Funds, smart beta products, and many index-based vehicles as composite securities (CSs) that facilitate trading the common factors in assets' liquidation values. Through accessing a larger basket of assets in endogenously chosen proportions,...

We survey aspects of the intellectual development of the economics of information from the 1970s to today. We focus here on models where information is communicated indirectly through actions. Basic results, such as the failure of the fundamental theorems of welfare economics, the non-existence...