This paper studies the role of financial frictions as a barrier to international trade. We investigate new exporter dynamics in order to identify the extent to which these frictions affect export decisions. We study an economy with heterogeneous firms subject to financing constraints and working...

We show, in a very plausible theoretical setting, that control function estimators (CFEs) of firm production function, such as Olley-Pakes, may be biased. The bias will occur, in particular, when investments respond differently to short- and long-lasting changes in productivity. We modify the...

We generalize permissibility (Brandenburger, 1992) to allow for any suitably defined model of preference and definition of possibility. We also prove that the generalized solution concept characterizes rationality, caution, and “common belief" of rationality and caution.

This paper considers the implications of population mobility for risk sharing among individuals and among regions of a federation. There is an important interaction between risk sharing and interregional redistribution which precludes the regional authorities from fully exploiting gains from...

We suggest a simple variant of Uzawa preferences which has the same predictions as his formulation, but is less prone to criticism. We assume that the rate of time preference is an increasing function of the total value of current financial assets. It is shown that an increase in the rate of...

It is widely recognized that “market failure” prevents e¢ cient risk sharing in natural disaster insurance. As a consequence, many countries adopted institutional frameworks involving public-private partnerships”. We de…ne risk selection as a situation where private companies pass...

This model demonstrates a restatement of the Mundell-Tobin effect and monetary non-superneutrality using an infinitely lived, representative agent model. The rate of time preference is assumed to be an increasing function of the total value of current financial wealth. An increase in the...

Differences in transmission mechanisms can generate asymmetric behaviour among currency union partners when they experience shocks. This has the potential to widen existing cyclical variation between members of a currency union. Our analysis suggests that the transmission mechanisms of GDP and...

Several explanations for the observed limited stock market participation have been offered in the literature. One of the most promising one is the presence of market frictions mostly in the form of fixed entry and/or transaction costs. Empirical studies strongly point to a significant structural...