This paper studies the impact of stock market development on cross country relative prices (the real exchange rate). A nonlinear relationship is uncovered in the cross section: prices and the stock market increase together in the beginning; then prices fall as the stock market continues to...

We review and construct consistent in-sample specification and out-of-sample model selection tests on conditional distributions and predictive densities associated with continuous multifactor (possibly with jumps) and (non)linear discrete models of the short term interest rate. The results of...

We compare Bayesian and sample theory model specification criteria. For the Bayesian criteria we use the deviance information criterion and the cumulative density of the mean squared errors of forecast. For the sample theory criterion we use the conditional Kolmogorov test. We use Markov chain...

We present a dynamic contracting model in which the principal and the agent disagree about the resolution of uncertainty, and we illustrate the contract design in an application with Bayesian learning. The disagreement creates gains from trade that the principal realizes by transferring payment...

This paper examines the evolution of risk in the U.S. financial sector using firm-level equity market data from 1975 to 2005. Over this period, financial sector volatility has steadily increased, reaching extraordinary levels from 1998 to 2002. Much of this recent turbulence can be attributed to...

Financial knowledge is an extremely important element not only of functioning and development, but more importantly of managing financial processes at local government level. Considering the progressing reforms of the national public finance system and the resulting consequences (legal,...

Berle and Means's analysis of the corporation - in particular, their view that those in control are not the owners of the corporation - raises questions about actions that corporations take to counter concerns regarding management's influence. What mechanisms, if any, do corporations implement...

We study the basic economic problem of choice between long-term and short-term commitments under a general characterization of uncertainty (aggregate uncertainty).When contingencies are contractible, a perfect market of Arrow-Debreau contingent claims implements the social optimum.When...

A model is presented where the question of bank regulation is developed under a principal-agent scenario in a regime where the regulator has limited resources and banks may have an incentive to act ultra virus the regulatory standards.If banks are subject to random audit, then compliance is...

In this paper, we explore the stochastic nature of implied recovery rates. We exploit the fact that differently-ranking debt instruments of the same issuer face identical default risk but different defaultconditionalrecovery rates. Specifically, we extract information from Credit Default Swaps...