External Debt Problem and Global Financial Architecture

Bank Ceos , inside Debt Compensation , and the Global Financial Crisis

Bank executives’ compensation has been widely identified as a culprit in the Global Financial Crisis, and reform of banker pay is high on the public policy agenda. While Congress targeted its reforms primarily at bankers’ equity-based pay incentives, empirical research fails to show any correlation between bank CEO equity incentives and bank performance in the Financial Crisis. We offer an alte...

Reforming the Global Financial Architecture

“Architecture” may seem a rather pretentious word to describe the ad hoc set of arrangements that make up the current international financial system . Even a reformed financial system will surely lack the clarity of structure and design that are the hallmarks of good architecture . But a financial system should nevertheless conform to certain broad principles, which can be readily understood an...

Debt Structure and Financial Flexibility

I study the relation between firm debt structure and future financial flexibility. I consider how the total level of debt, maturity, security, and priority may potentially impact a firm’s ability to raise new financing and undertake profitable investments. I find that firms with lower total debt (high debt capacity) are more financially flexible. Lower leverage increases future new debt issues ...

Financial Stability and Casino Debt

Ignorance, Debt and Financial Crises

In this paper we provide a theory of money markets and private money. We show that preserving symmetric ignorance in liquidity provision is welfare maximizing and strictly dominates symmetric or even perfect information. A key property for the functioning of money markets is when agents have no need to ask questions and no incentive to produce private information about the value of the security...