The paper analyzes the intensity of choice in an agent based financial optimization problem. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. We specify a model for the allocation of new funds, switching between funds, and withdrawals and...

Inference on the long-run properties of a Vector Autoregression (VAR) consisting wholly of I(1) variables are made using Bayesian methods. In particular, the implications on the forecast and impulse response function distributions of directly estimating and restricting the drift parameters of...

We extend the literature on the effects of managerial entrenchment on capital structure to consider how safety-net subsidies and financial distress costs interact with managerial incentives to influence capital structure in U.S. commercial banking. Using cross-sectional data on publicly traded,...

This paper studies an exchange economy with indivisibilities. Our main goal is to see if a price system can function well in an economy (e.g., an economy with complementary preferences) that does not have a Walrasian equilibrium. We study the price adjustment processes governed by the Euler...

Why are some financial crises associated with political crises and some are not? Does political instability cause financial fragility or the other way around? What are the implications of political distortions for policy in countries experiencing financial turmoil? This paper studies these and...

This paper investigates the predictions of a simple optimizing model of nominal price rigidity for the dynamics of inflation. Taking as given the paths of nominal labor compensation and labor productivity to approximate the evolution of marginal costs, I determine the path of prices predicted by...

The small open economy model with incomplete asset markets features a steady state that depends on initial conditions. In addition, equilibrium dynamics posses a random walk component. A number of modifications to the standard model have been proposed to induce stationarity. This paper presents...

We construct a simple firm-based model of global interdependence. We show how extremely strong statistical correlations can naturally develop between countries even if the interconnections between those countries remain very weak. Potential policy implications of this result are also discussed.

This paper investigates the effects of fiscal policy on economic activity, welfare, income distribution, and public finances in a dynamic general equilibrium model with a unionized labor market. The paper shows that increases to public employment, wages of public sector employees, unemployment...