This article investigates which firms borrow directly from the capital markets and which raise funds through intermediaries. Our empirical results show that large companies with abundant cash and collateral tap the credit markets directly. These markets cater to safe and profitable industries,...

This paper challenges the time-inconsistency case for central bank independence. It argues that the time-inconsistency literature not only seriously confuses the substance of the rules versus discretion debate, but also posits an implausible view of monetary policy. Most worrisome, the...

Stackelberg differential games are useful settings in which optimal government policies can be studied. This paper argues that the analysis of these games involves a key technical issue. In particular, we question the necessity for optimality of one boundary condition invoked in existing...

We investigate the incentives of a monopolistic seller to delay the introduction of a new and improved version of his product. By analyzing a three-period model, we show that the seller may prefer to delay introducing a new product, even though the enabling technologies for the product are...

In this paper we address the issue of multilateralism versus bilateralism in a situation where a home government's optimal policy is time-inconsistent and the time-consistent policy sub-optimal. Short-run production and wage rigidities create incentive for the government to surprise private...

In the literature, little role is attributed to the country risk conditional volatility in the determination of the macroeconomic equilibrium in a developing small open economy (DSOE). This paper posits the prime hypothesis that, in the presence of multiple equilibria and self-fulfilling...

This paper introduces a new open source Gauss library to estimate Multivariate Hidden Markov Models (HMM) in their simpler specification. These new programs are based upon the works of Hamilton (1994) and Krolzig (1998) and allow assessment of models with 2, 3 or 4 states through classical...

This paper discusses the role of the credit rating agencies during the recent financial crises. In particular, it examines whether the agencies can add to the dynamics of emerging market crises. Academics and investors often argue that sovereign credit ratings are responsible for pronounced...

This paper examines data for stock prices and price levels of 14 developed countries during the post-WWII era and compares their behavior in that sample with behavior over the past two centuries in the UK and the US. Contrary to much of the literature of the past several decades, we find that...

Using Minsky (1986), this paper attempts to answer two questions: (1) How does policy affect real and nominal variables? and (2) How should monetary policy be conducted so as to improve the performance of the economy? Minsky asserted that rising interest rates, brought about by contractionary...