We analyze how a wealth shift to emerging countries may lead to instability in developed countries. Investors exposed to expropriation risk are willing to pay a safety premium to invest in countries with good property rights. Domestic intermediaries compete for such cheap funding by carving out...

Poverty lines are typically higher in richer countries, and lower in poorer ones, reflecting the relative nature of national assessments of who is considered poor. In many high-income countries, poverty lines are explicitly relative, set as a share of mean or median income. Despite systematic...

Government interventions such as bailouts are often implemented in times of high uncertainty. Policymakers may therefore rely on information from financial markets to guide their decisions. We propose a model in which a policymaker learns from market activity and where market participants have...

Financial markets face the constant threat of cyber attacks. We develop a principal-agent model of cyber-attacking with fee-paying clients who delegate security decisions to financial platforms. We derive testable implications about clients' vulnerability to cyber attacks and about the fees...

We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability. The endogenous benefit of opacity is lower fragility when profitability is expected to...