In this paper we question the idea that the deduction of debt interest is always an effective policy instrument to spur firm investment. We analyze the investment decision in presence of a borrowing constraint on the amount of the debt that the firm can raise. We show that if the debt interest...

We study the impact of R&D and innovation on the use of external numerical flexibility (ENF). R&D and innovation imply both a higher average and a higher volatile productivity. We investigate this ambiguous effect on the firm preference for using ENF in two steps. First, we use a simple model to...

This paper questions the idea that the deduction of debt interest is always a good policy instrument in order to spur investment. Particularly, it analyzes the investment choice in a "financing hierarchy" framework with an exogenous constraint on the amount of the debt that the firm can...

The paper investigates the nexus between labor and financial markets, focusing on the interaction between labor union behavior in setting wages, firms' investment strategy and asset prices. The way unions set wage claims after observing firm's financial performance increases the volatility of...

This paper develops a two-sector dynamic general equilibrium model in which intertemporal fl‡uctuations (and sectoral comovement) are driven by idiosyncratic shocks to relative preferences between consumption goods. This class of shocks may be interpreted as shifts in consumer tastes. When...

This paper develops a two-sector dynamic general equilibrium model in which intermporal fluctuations (and sectoral comovement) are driven by idiosyncratic shocks to relative preferences between consumption goods. This class of shocks may be interpreted as shifts in consumer tastes. When shifts...