Typically, central banks intervene with asset markets. This paper shows that if the productivity fluctuation is sufficiently large, the following nominal intervention on a product market is non-neutral: Whenever the negative productivity shock hits, the central bank produces fiat money to buy...

Bank credit, as a means of payment, circulates in a circuit: It is first originated from the banking system, then used for trading, and eventually deposited back to the banking system. This circulation creates an interbank network that has been little studied. I characterize how this interbank...

The Reputation of a natural person is anchored by his type, the characterisitics invariant over time. Since the members change from time to time, an organization has no type. Then how can it derive reputation now from its past? And if it bears reputation without backed by a fixed type, what is...

This paper considers the efficiency of money creation by banks and the principles of the central bank issuance to improve over it. The ability to issue deposit liability as a means of payment enlarges banks lending capacities and subjects them to fiercer competition. In curcumstances where banks...

This paper offers a new approach, based on risk sharing, to endogenize the leverage of financial intermediaries. It endogenizes debt as the optimal contract for external financing, thereby capturing two features of leverage: debt serves to boost the return on equity, and equity provides...

The paper proposes that the organization of financial markets is decided by the allocation of the liability to repay investors. Based on the liability allocation, the paper examines all possible modes of organizing finance and monitoring in an economy a la Townsend (1979). The equilibrium mode...

The paper shows that the principal can enhance her control over the agent's human capital by acquiring the physical capital that is critical for him to create value. However, the enhancement in the control necessarily reduces his incentive to make human capital investment ex ante and to exert...

This paper presents a model on the leverage of financial intermediaries, where debt are held by risk averse agents and equity by the risk neutral. The paper shows that in an unregulated competitive market, financial intermediaries choose to be leveraged over the social best level. This is...

Current intrusion detection systems are mostly for detecting external attacks, but the “Prism Door” and other similar events indicate that internal staff may bring greater harm to organizations in information security. Traditional insider threat detection methods only consider the audit...