Published

In a financial market where agents trade for short-term profit and where news can increase the uncertainty of the public belief, there are strategic complementarities in the acquisition of private information, and if the cost of information is sufficiently small, is a continuum of equilibrium strategies. Imperfect observation of past prices reduces the continuum of Nash-equilibria to a Strongly Rational-Expectations Equilibrium. In that equilibrium, there are two sharply different regimes for the evolution of price, the volume trade and the information acquisition.

In a simple model of a frictionless financial market with rational agents,  the value of private information increases when large discrete  shocks independently affect the fundamental value of the asset and the exogenous trading. The complementarity in information gathering generates multiple equilibria.

A model of lending is presented where loans are established in matches between banks (lenders) and entrepreneurs (borrowers) who meet in a search process. Projects turn out randomly a quick payoff or a long-term payoff that requires a rollover of the loan. The model generates, under proper parameter conditions, two steady states without or with rollover, and rollover is socially inefficient. Under imperfect information, the standard debt contract is privately efficient. However, it extends the domains of equilibria with socially inefficient rollover. The global dynamics displays a continuum of equilibrium paths that each exhibits sudden discontinuities - crises - in which the mass of outstanding loans is reduced by a quantum amount of terminations. Crises have a cleansing effect. 

The coordination of saving and investment is analyzed in a general equilibrium model with rational expectations and no forward market. Shocks affect preferences for future consumption. A paradox of thrift is proven within a general equilibrium model. The model formalizes an argument in the General Theory of Keynes but the equilibrium is a constrained Pareto optimum. Textbook fiscal policies are neutral at best, or inefficient.