We develop a dynamic model that incorporates the insights of both the agency cost and asset specificity literature aboutcorporate finance. In general, we find that neither can be ignored, and that the optimal capital structure minimizes agency cost and asset specificity considerations. A key...

This paper examines why unemployed skilled workers are reluctant to accept interim unskilled jobs. We develop a bilateral search model in which workers face a job change cost and firms incur a hiring cost for each vacancy filled. The outcome of the bilateral search displays mismatching where...

This paper tests for nonlinearity in EMS exchange rates using the bispectrum. The early experience of the ERM witnessed numerous realignments. We find that exchange rates follow a linear process over the period 1979-1987, consistent with the predictions of the realignment target zone model,...