This paper surveys dynamic stochastic general equilibrium models with financial frictions in use by central banks and discusses priorities for future development of such models for the purpose of monetary and financial stability analysis. It highlights the need to develop macrofinancial models...

We find that Credit Rating Agencies (CRA)'s opinions have an impact in the cost of funding of sovereign issuers and consequently ratings are a concern for financial stability. While ratings produced by the major CRAs perform reasonably well when it comes to rank ordering default risk among...

A principal wants two sequential tasks to be performed by wealth-constrained agents. When the tasks are conflicting (i.e., when a first-stage success makes second-stage effort less effective), the principal's profit-maximizing way to induce high efforts is to hire one agent to perform both...

This paper explores the conditions that characterize the optimality for a principal (health manager) to undertake investments to motivate agents (doctors). In the model, doctors are intrinsically motivated and can have different identities. We develop a principal agent dynamical model with moral...

This paper introduces asymmetric awareness into the classical principal-agent model and discusses the optimal contract between a fully aware principal and an unaware agent. The principal enlarges the agent’s awareness strategically when proposing the contract. He faces a trade off between...

We build a general equilibrium model of monopolistic competition with moral hazard contracting to examine the interactions among skill-biased technological change (SBTC), organizational changes, and skill premium and within-group wage inequality. While the existing literature finds that the...