Official development assistance is a key source of external finance in many developing countries. A striking feature of these aid flows is their positive correlation with the business cycle of recipient countries. This pattern is puzzling in that it reinforces recipients' already strong and...

In this paper, I explore how optimal aggregate dynamics can be shaped by the presence of moral hazard in unemployment insurance. I also analyze the optimal provision of unemployment insurance and the implications for the amount of cross-sectional heterogeneity. The economy that I consider embeds...

Using a unique panel design that enables to control for bank, firm, market and loan heterogeneities, we confirm that relationship lenders charge higher rates in good times and lower rates in bad times. However, we show that risky single-bank firms do not benefit from this insurance mechanism and...

Using a unique panel design that enables to control for bank, firm, market and loan heterogeneities, we confirm that relationship lenders charge higher rates in good times and lower rates in bad times. However, we show that risky single-bank firms do not benefit from this insurance mechanism and...

We study the macroeconomic implications of asymmetric information in capital markets. We build a quantitative capital-accumulation model in which capital is traded in illiquid markets, with sellers having more information about capital quality than buyers. Asymmetric information distorts the...

I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since...

This paper develops a model of banking frictions and banking risk, the importance of which is highlighted by the recent Global Financial Crisis (GFC). As a sort of systemic risk, changes in banking risk lead to fluctuations in aggregate economic activity. We propose a model-based approach to...

Systemic risk builds up during booms in an economy featuring asymmetric information in asset markets, where investors' hidden effort choices endogenously determine asset quality distribution. Higher asset prices during booms induce more investors to sell their assets, which lowers their...

Asymmetric information is crucial for understanding the disruption of the supply of credit. This paper studies a dynamic economy featuring asymmetric information and resulting adverse selection in credit markets. Entrepreneurs seek loans from banks for projects, but asymmetric information about...

Stock markets play a dual role: help allocate capital by conveying information about firms' fundamentals and provide liquidity by quickly turning stocks into cash. We propose a trading model in which these two roles are endogenously related: more intensive use of stocks for liquidity affects...