©2019 by David Lindequist.

 

Working Papers

I propose a new channel of international risk sharing: the common currency channel. I show theoretically that the central bank of a currency union can use the common currency to insure member countries against consumption risk from idiosyncratic productivity shocks. A trade-off between risk-sharing and moral hazard emerges...

We study the interplay between the business cycle and financial contracting. If the success probability of an investment project is increasing in both the business cycle state and the borrower’s effort, then the borrower can free-ride on the cycle. In a model of financial contracting with moral hazard, we show that this free-riding...

We study how social conflict generated through cultural diversity affects public policy. In our model, social conflict arises when diverse groups impose negative consumption externalities on each other. These externalities can be mitigated by a government which transforms cultural consumption into public good consumption. We show...