We apply perturbation theory to solve the optimal control problem of an investor with time-additive power utility over intermediate consumption and final wealth. Under general conditions we show existence of a power series representation for the prevailing optimal consumption and investment...

We solve analytically the Merton's problem of an investor with time-additive power utility. For general state dynamics, we prove existence of two power series representations of the relevant optimal policies and value functions, which hold for all admissible risk aversion parameters. We...

We apply perturbation methods to solve in closed form a class of robust control problems, implied by Anderson, Hansen and Sargent setting of a preference for robustness. In the constant investment opportunity set case, we obtain closed form power series solutions for the arising robust Bellman...

Fixed transaction costs and delivery lags are important costs of international trade. These costs lead firms to import infrequently and hold substantially larger inventories of imported goods than domestic goods. Using multiple sources of data, we document these facts. We then show that a...

This paper examines the response of industries and firms to changes in trade costs. Several new firm-level models of international trade with heterogeneous firms predict that industry productivity will rise as trade costs fall due to the reallocation of activity across plants within an industry....

This paper focuses on the issue of limited financial market participation and determines a lower bound on the level of fixed transaction costs that are required to reconcile observed portfolio choices with asset returns within an isoelastic utility framework. The bound is determined from the set...

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...

Using distance and time zone differences as a measure for coordination costs between service suppliers and consumers, we employ a Hausman- Taylor model for services trade by foreign affiliates. Given the need for proximity in the provision of services, factors like distance place a higher cost...