This paper provides a new framework to study the term structure of interest rate spreads and the maturity composition of sovereign bonds. As observed in the literature, sovereign interest rate spreads increase during crises, with short term interest rate spreads rising more than long term...

Currently U.S. firms hold record amounts of cash. The authors explore cross-sectional variation in cash holdings of U.S. publicly traded firms to shed light on the reasons for this recent trend. First, they identify factors that correlate with cash holdings and then examine the evolution of...

U.S. corporations are holding record-high amounts of cash. One reason has to do with taxes—both the uncertainty about future taxes and the reality of today’s tax rules. The second reason has to do with the rise of research and development; because of its uncertain nature, this sort of work...

When consumers can’t pay their credit card bills, they choose between delinquency and bankruptcy. A new economic model indicates that by changing the face value of delinquent debt, lenders can maximize repayment and make a difference in whether or not a household chooses bankruptcy.

A delinquency rate of 15 percent for all student loan borrowers implies a delinquency rate of 27.3 percent for borrowers with loans in repayment.

How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as intermediation spreads and the firm-size distribution for...

We incorporate house price risk and mortgages into a standard incomplete market (SIM) model. We calibrate the model to match U.S. data, and we show that the model also accounts for non-targeted features of the data such as the distribution of down payments, the life-cycle prole of homeownership,...

To address how technological progress in financial intermediation affects the economy, a costly-state verification framework is embedded into the standard growth model. The framework has two novel ingredients. First, firms differ in the risk/return combinations that they offer. Second, the...