In this Paper we introduce flexibility as an economic concept and apply it to the firm’s security-issuance decisions and capital structure choice. Flexibility is the ability to make decisions that one thinks are best even when others disagree. Firms value flexibility because it allows...

This Paper studies a model where individuals have imperfect self-knowledge and learning is costly. It shows that the endogenous decision to collect information before taking an action creates a systematic and testable bias in the aggregate behaviour of agents in the economy. More precisely,...

A competitive stock market is embedded into a neoclassical growth economy to analyze the interplay between the acquisition of information about firms, its partial revelation through stock prices, capital allocation and income. The stock market allows investors to share their costly private...

This paper argues that the stock market crash of 2008, triggered by a collapse in house prices, caused the Great Recession. The paper has three parts. First, it provides evidence of a high correlation between the value of the stock market and the unemployment rate in U.S. data since 1929....

In a capitalist economy capitalists can sell their stake in a firm on the stock market whereas workers cannot sell their jobs. It is argued that when workers have some bargaining power this asymmetry in property rights leads to inefficiencies. The consequences of this are explored and certain...

Monetary arrangements in Europe vacillated wildly over the last decade, and they may be expected to continue to do so over the next. The literature on this chaotic process has focused on issues of credibility. Here, we focus instead on the longer-run implications of Europe's choice of monetary...

Although for the most part this paper is concerned with others' work, it is not a survey of the literature. Notable omissions are: the shoe-leather effect, the Tobin effect, the real effects of nominal (government) institutions. The first part looks at the relationship between inflation,...

Asset price inflation presents central banks with a puzzle. I examine the case of Germany, 1925-7, when the Reichsbank intervened to bring down stock prices, rectify imbalances and curb speculation. Present value relations, comparisons with historical valuation measures and the time-series...

This paper develops a new analysis of the U. S. economy in the 1920s that is illuminated by contrasts with the 1990s, and it also re examines the causes of the Great Depression. In both the 1920s and the 1990s the acceleration of productivity growth linked to the delayed effects of previously...

This paper empirically analyses the determinants of an initial public offering (IPO) and the consequences of this decision on a company's investment and financial policy. We compare both the ex-ante and the ex-post characteristics of IPOs with those of a large sample of privately held companies...