Most research on firm financing studies the choice between debt and equity. We model an alternative source -- non-core asset sales -- and identify three new factors that drive a firm's choice between selling assets and equity. First, equity investors own a claim to the cash raised. Since cash is...

Which is the more profitable way to sell a company: a public auction or an optimally structured negotiation with a smaller number of bidders? We show that under standard assumptions the public auction is always preferable, even if it forfeits all the seller's negotiating power, including the...

The paper develops a forward-looking comprehensive accounting framework for the public sector. By integrating the public sector budget constraint forward in time the government's present value budget constraint (PVBC) is obtained. In addition to the familiar financial assets and liabilities,...

The paper considers the response of a small, open dependent economy to a variety of fiscal and financial shocks. It also examines the influence of alternative budget-balancing rules on the response of the economy to external shocks, such as a change in the world interest rate. The approach...

The Paper deals with the principles that should govern the design of budgetary and financial policy. The analytical divorce between stabilisation policy, which concerns deviations from full employment (or full information) equilibrium and allocative policy which concerns the full employment (or...

We offer a new explanation as to why international trade is so volatile in response to economic shocks. Our approach combines the uncertainty shock idea of Bloom (2009) with a model of international trade, extending the idea to the open economy. Firms import intermediate inputs from home or...

In our model multiple innovators compete against each other by submitting investment proposals to an investor. The investor chooses the least expensive proposal and when to invest in it. Innovators have to provide costly effort and they learn privately the cost of investing. Multiple efforts...

This Paper examines irreversible investment in a project with uncertain returns, when there is an advantage to being the first to invest, and externalities to investing when others also do so. Pre-emption decreases and may even eliminate the option values created by irreversibility and...

Empirical studies have found that takeover activity is positively related to the absolute size of industry-level shocks. In this paper we develop a dynamic framework to analyze the timing of takeover which explains this pattern. Takeover may create value either by exploiting synergies or through...

We show that time-to-build, which creates a lag between the decision to invest and production, is an important element of industry structure. We study a multi-period investment game where there is demand uncertainty. Allowing for time-to-build alters, non-monotonically, the classic trade-off...