International firms have an incentive for risk management due to the enormous volatility of the floating foreign exchange rates. Often firms must cross hedge since in reality, not every currency is traded in a futures market. That is, the exporting firm uses futures whose value is highly...

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Using a two-moment decision model, this paper analyzes corporate hedging behavior in the presence of differential versus unified income taxation. We start with the well-known result that risk-taking may increase when income tax rates increase and, therefore, the incentive for hedging decreases....

The purpose of this paper is to assess under what conditions exchange rate volatility exerts a positive effect on a firm’s labour demand. As the exchange rate volatility increases, so does the value of the export option provided the firm under study is flexible. Flexibility is important...

We show the incentive for divisionalization by a monopolist producer. In contrast to the previous literature, where divisionalization occurs for product market advantage, we show that divisionalization occurs if it provides strategic advantage in the labor market. With unionized labor market, we...

In a successive Cournot oligopoly, we show the welfare effects of entry in the final goods market with no scale economies but with cost difference between the firms. If the input market is very concentrated, entry in the final goods market always increases welfare. If the input market is...

In this paper we study the impact of more transparency in the foreign exchange market on the <i>ex ante</i> expected volume of international trade. Transparency is measured by the informational content of publicly observable signals. These signals convey information about the use of policy instruments...

In an intertemporal model the impact of exchange rate risk on an international firm is studied under the assumption that no forward markets are existing in the foreign currency. However, there is a forward traded financial asset, whose spot price is highly correlated with the random spot...

The paper revisits the impact of uncertainty on the decision problem of a bank. The bank extends risky loans to private investors and sells deposits to savers at fixed rates. The uncertainty under which deposit/loan-portfolios are chosen by banks is endogenized through an information system that...