In this paper, we measure the potential welfare gains from counter-cyclical policy in an economy with incomplete markets. In the course of conducting this measurement, we focus on two questions as central to the determination of those potential gains: (1) what is the likely effect of...

In this paper we show that interest rate rules lead to multiple equilibria when the central bank faces a limit to its ability to print money, or when private agents are limited in the amount of bonds that can be pledged to the central bank in exchange for money. Some of the equilibria are...

We analyze a new class of equilibria that emerges when a central bank conducts monetary policy by setting an interest rate (as an arbitrary function of its available information) and letting the private sector set the quantity traded. These equilibria involve a run on the central bank's interest...

This paper develops new recursive methods for studying stationary sequential equilibria in games with private monitoring. We first consider games where play has occurred forever into the past and develop methods for analyzing a large class of stationary strategies, where the main restriction is...

This paper presents a continuous-time reputation model of sovereign debt allowing for both varying levels of partial default and full default. In it, a government can be a non-strategic commitment type, or a strategic opportunistic type, and a government's reputation is its equilibrium Bayesian...

This paper presents a continuous-time model of sovereign debt. In it, a relatively impatient sovereign government's hidden type switches back and forth between a commitment type, which cannot default, and an optimizing type, which can default at any time, and assume outside lenders have...

How can banks and similar institutions design optimal compensation systems? Would such systems conflict with the goals of society? This paper considers a theoretical framework of how banks structure job contracts with their employees to explore three points: the structure of a socially optimal...

We develop a simple dynamic economic model of epidemic transmission designed to be consistent with widely used SIR biological models of the transmission of epidemics, while incorporating economic benefits and costs as well. Our main finding is that targeted testing and isolation policies deliver...