We investigate how a combination of limited liability and preexisting debt distort firms' investment and equity payout decisions. We show that equity holders have incentives to "double-sell" cash flows in default, leading to overinvestment, provided that the firm has preexisting debt and the...

We investigate how a combination of limited liability and preexisting debt distort firms' investment and equity payout decisions. We show that equity holders have incentives to “double-sell” cash flows in default, leading to overinvestment, provided that the firm has preexisting debt and the...

I use nominal and real bond risks as new moments to discipline a New Keynesian asset pricing model, where supply shocks, demand shocks, and monetary policy are the fundamental drivers of inflation. Endogenously time-varying risk premia imply that nominal bond risks--as measured by their stock...

We estimate perceptions about the Fed's monetary policy rule from micro data on professional forecasters. The perceived rule varies significantly over time, with important consequences for monetary policy and bond markets. Over the monetary policy cycle, easings are perceived to be quick and...

The frequency with which firms adjust output prices helps explain persistent differences in capital structure across firms. Unconditionally, the most flexible-price firms have a 19% higher long-term leverage ratio than the most sticky-price firms, controlling for known determinants of capital...

The frequency with which firms adjust output prices helps explain persistent differences in capital structure across firms. Unconditionally, the most flexible-price firms have a 19% higher long-term leverage ratio than the most sticky-price firms, controlling for known determinants of capital...

The frequency with which firms adjust output prices is an important determinant of persistent differences in capital structure across firms. The most flexible-price firms have a 19% higher long-term financial leverage ratio than the most sticky-price firms, controlling for known determinants of...