This paper develops a model of an economy where bank credit supports both productive investment and individual consumption smoothing in the face of idiosyncratic income risk. Bank credit is constrained by bank equity capital.
This paper studies an economy where agents can spend resources on consuming a private good and on funding a public good. There is asymmetric information regarding agents’ relative preference for private versus public good consumption.
I build a model of optimal managerial compensation where managers each have a privately observed propensity to manipulate short-term stock prices.
This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crisis. A pecuniary externality entails that banks’ desire to accumulate capital over time aggravates the scarcity of informed capital during the financial crisis.