I examine a simple model of dynamic moral hazard in which the agent has persistent private information. I show that despite the complexity of the framework, the problem has a simple solution that can be found using standard methods. The incentives at the optimal contract can be captured using...

This paper presents a theoretical model of the monitoring behaviour of a bank-intermediated financial system with a rolling portfolio of long-term loans. The projects funded by the loans are subject to persistent idiosyncratic shocks that are freely observed by the borrowers. Borrowers pay entry...