The effects of four environmental policy options for the reduction of pollution emissions, i.e. taxes, emission standards, auctioned permits and freely allocated permits, are analyzed. The setup is a real option model where the amount of emissions is determined by solving the firm's profit...

We develop a model on the optimal timing of switching from non-renewable to renewable energy sources with endogenous extraction choices under emission taxes, subsidies on renewable resources and abatement costs. We assume that non-renewable resources are "dirty" inputs and create environmental...

“Ecological monsters” (“eco-monsters”) can be the bizarre, but legal, outcome of rational choices made by two agents: (i) a firm whose investments depend on Governmental permits; (ii) a policy maker having the discretionary power on the permits. This paper will determine the existence...

This paper contributes to the debate on alternative corporate tax schemes, employing a rigorous real option methodology which has never been used to study both liquidation policy and taxation. Different tax systems are considered, according to whether the tax regime is progressive or flat and...

This paper develops a real option model in which the interaction between debt, liquidation policy and risky investments is studied. We consider a manager who owns the firm and faces the opportunity to invest in risky pro jects which may bo ost current profits at the cost of bankruptcy if they...

This paper extends the transformed maximum likelihood approach for estimation of dynamic panel data models by Hsiao, Pesaran, and Tahmiscioglu (2002) to the case where the errors are cross-sectionally heteroskedastic. This extension is not trivial due to the incidental parameters problem that...

Vector autoregressions (VARs) are important tools in time series analysis. However, relatively little is known about the nite-sample behaviour of parameter estimators. We address this issue, by investigating ordinary least squares (OLS) estimators given a data generating process that is a purely...