We investigate the information content of inter-transaction time and find that it varies both across stocks and over time. On average, inter-transaction time is found to be informative whenever stocks are sufficiently traded. The magnitude of the information content is found to be larger for...

In the U.S., the insolvency resolution of most corporations is governed by the federal bankruptcy code and is administered by special bankruptcy courts. Most large corporate bankruptcies are resolved under Chapter 11 reorganization proceedings. However, commercial bank insolvencies are governed...

Because a significant portion of U.S. students lacks critical mathematic skills, schools across the country are investing heavily in computerized curriculums as a way to enhance education output, even though there is surprisingly little evidence that they actually improve student achievement. In...

This paper considers an optimal taxation environment where household income is private information, and the government randomly audits and punishes households found to be underreporting. We prove that the optimal mechanism derived using standard mechanism design techniques has a bad equilibrium...

In this paper, we derive principles of optimal cyclical monetary policy in an economy without capital, with a cash-in-advance restriction on household transactions, and with monopolistic firms that set prices one period in advance. The only distortionary policy instruments are the nominal...

Household investment, that is investment in consumer durables and housing, leads non-residential fixed investment over the U.S. business cycle. This observation represents a potent challenge to real business cycle (RBC) theory. First of all the theory has been unable to account for it. In...

In this paper, we provide evidence on the value of banking relationships by examining the stock market valuation impact of three large bank failures in Japan in 1997 and 1998 on their clients and the clients of surviving banks. Bank failures are theorized to have adverse consequences for other...

Rising traffic congestion and the need to improve operational efficiency prompted the Illinois Tollway Authority to unveil plans to reconfigure its road network for “stop-free” electronic toll collection. Committing to an extensive construction program would have required the Tollway to...

In this article, we construct a model to study competing payment networks, where networks offer differentiated products in terms of benefits to consumers and merchants. We study market equilibria for a variety of market structures: duopolistic competition and cartel, symmetric and asymmetric...

This paper develops an equilibrium model of speculative bubbles that can be used to explore the role of various policies in either giving rise to or eliminating the possibility of asset bubbles, e.g. restricting the use of certain types of loan contracts, imposing down- payment restrictions, and...