We use a dynamic adjustment model and panel methodology to investigatethe determinants of a time- varying optimal capital structure. Because firmsmay temporarily deviate from their optimal capital structure in the presenceof adjustment costs, we also endogenize the adjustment process. In partic...

We analyze the asset allocation decisions of different investor groups and investigate how their investmentbehavior changes with macroeconomic conditions. Using a new data set that includes themonthly portfolio holdings of private, commercial, and institutional investors deposited with...

Banking regulators often practice forbearance and ambiguity in insolvency resolutions. The paperexamines the effects of regulatory forbearance and ambiguity in a context of allocational efficiency.Bailouts, liquidations and their stochastic policy mix lead to suboptimal allocations if banks do...

Financial intermediaries may increase economic efficiency through intertemporal risk smoothing.However without an adequate regulation, intermediation may fail to do this. This paper studiesthe effects of a production shock in a closed economy and compares abilities of market-based andbank-based...

This paper contributes to the literature by introducing the nexus between financial constraints and thecapital-labour uptake and by considering the capital-labour ratio to overcome the problems that haveplagued investment literature -regarding the investment-cash flow sensitivity of constrained...

We propose an empirical approach to determine the various economic sourcesdriving the US yield curve. We allow the conditional dynamics of the yield at differ-ent maturities to change in reaction to past information coming from several relevantpredictor variables. We consider both endogenous,...

We consider the effects of an imperfectly competitive banking sector on the capital stock in a version of the two-period Diamond OLG model, focusing on how profits are returned. There are two broad alternatives: profits may be taxed and returned to households exogenously as fiscal transfers or...

We analyse a model of two-sided matching and incentive contracts where expertinvestors (venture capitalists) with different monitoring capacities are matched withfirms with different levels of initial wealth. Firms do not have sufficient start-upcapital to cover their project costs and hence,...

A simple consumption-based two-period model is used to study the (theoretical)effects of disagreement on asset prices. Analytical and numerical results showthat individual uncertainty has a much larger effect on risk premia than disagreementif (i) the risk aversion is reasonably high and (ii)...

This paper investigates the role of trade credit in the transmissionof monetary policy. Most models of the transmission mechanism allowthe firm to access only financial markets or bank lending according tosome net worth criterion. In our model we introduce trade creditas an additional source of...