China is now facing the challenges of high leverage. Our study has examined the role of firms’ rising debt in explaining the decrease in labor share in recent years. We developed a model to show that firms may strategically use debt to increase their bargaining power, resulting in lower labor...

We develop a model of self-fulfilling default cycles with demand externality a la Dixit- Stiglitz to explain the recurrent clustered defaults observed in the data. The literature reports that observable fundamental factors alone are insufficient to explain the cluster. A decline in aggregate...

A large number of financial assets are traded in both exchanges and over-the-counter markets (i.e., centralized and decentralized markets, CM and DM hereafter, respectively). Moreover, as documented by Biais and Green (2019), the 20th century has witnessed a secular migration of asset trade from...