This paper uses a real-options model of a farming operation to show how standard loan contracts create incentives for farmers to focus on short-term financial performance at the expense of the farm's long-term natural capital. These incentives are a manifestation of the debt overhang problem....

Enormous public investment will occur as communities adapt to climate change. Much of this investment will be irreversible and the future benefits are currently uncertain. The real options embedded in adaptation projects are therefore potentially important and their existence needs to be...

This paper uses a competitive-equilibrium housing-market model to evaluate the role that interest rates played in the U.S. housing boom and bust. The model features stochastic construction costs, disposable income, interest rates, and population, and endogenously determines the supply of...