355 research outputs found
Hidden Stimuli to Capital Formation: Debt and the Incomplete Adjustment of Financial Returns
There is a common belief that the disappointing economic performance in the 1970s can be attributed in good part to the interaction of tax rules, inflation, and capital formation. In this paper, we reassess the relationships between inflation, the tax code, and investment incentives because previous results are based on a number of tenuous assumptions whose impact has not been fully appreciated. We also question the appropriateness of the conventional user cost formulation, and derive an alternative measure taking explicit account of the role of debt -- acquisition,retirement, and net-of-tax interest payments -- and the equity holders' ownership of the firm. Our numerical results show that previously reported disincentives for acquiring capital goods in generaland against longer-lived capital in particular are attenuated, and in a number of cases reversed, under various sets of assumptions. Differences in results stemming from the conventional and modified user costs are highlighted, and are illustrated by a comparison of the U.S. Treasury's tax reform proposals under the two formulations.
Regional policy spillovers : the national impact of demand-side policy in an interregional model of the UK economy
UK regional policy has been advocated as a means of reducing regional disparities and stimulating national growth. However, there is limited understanding of the interregional and national effects of such a policy. This paper uses an interregional computable general equilibrium model to identify the national impact of a policy-induced regional demand shock under alternative labour market closures. Our simulation results suggest that regional policy operating solely on the demand side has significant national impacts. Furthermore, the effects on the nontarget region are particularly sensitive to the treatment of the regional labour market
Legal systems, national governance and renewable energy investment : evidence from around the world
This paper examines renewable energy (RE) investment and the role of a country’s legal system in shaping investment decisions. Analysing data from 236 renewable energy
companies between 2000 and 2017 across the world, our study establishes that those in a
common law system are more responsive to growth opportunities in RE investment, while
facing greater financial constraints than their counterparts in civil law systems. Our study
demonstrates that the global imbalance in RE development is caused by the influence of a
country’s legal system, which determines the regulatory and business ethos that impacts
on the trajectory of investment, and by the varying degrees of accountability implicit in a
country’s governance environment. Our research raises the implication that the opportunity costs of forgone economic gains are in direct conflict with long-term environmental
goals, retarding the transition from carbon-based to sustainable sources of energy, and
provides insights into how development can be stimulated by fiscal incentives, favourable
regulations, societal engagement, improved access to finance and the alignment of national strategies. Our findings contribute to the economic literature of legal origin theory
and establish fundamental principles for refining global RE development strategy and
confronting the challenge of climate change
Peculiar Velocity Limits from Measurements of the Spectrum of the Sunyaev-Zel'dovich Effect in Six Clusters of Galaxies
We have made measurements of the Sunyaev-Zel'dovich (SZ) effect in six galaxy
clusters at z > 0.2 using the Sunyaev-Zel'dovich Infrared Experiment (SuZIE II)
in three frequency bands between 150 and 350 GHz. Simultaneous multi-frequency
measurements have been used to distinguish between thermal and kinematic
components of the SZ effect, and to significantly reduce the effects of
variations in atmospheric emission which can otherwise dominate the noise. We
have set limits to the peculiar velocities of each cluster with respect to the
Hubble flow, and have used the cluster sample to set a 95% confidence limit of
< 1410 km/s to the bulk flow of the intermediate-redshift universe in the
direction of the CMB dipole. This is the first time that SZ measurements have
been used to constrain bulk flows. We show that systematic uncertainties in
peculiar velocity determinations from the SZ effect are likely to be dominated
by submillimeter point sources and we discuss the level of this contamination.Comment: Submitted to Astrophysical Journal. 32 pages, 13 tables, 9 figure
Economic Activity of Firms and Asset Prices
In this review we survey the recent research on the fundamental determinants of stock returns. These studies explore how firms' systematic risk and their investment and production decisions are jointly determined in equilibrium. Models with production provide insights into several types of empirical patterns, including (a) the correlations between firms' economic characteristics and their risk premia, (b) the comovement of stock returns among firms with similar characteristics, and (c) the joint dynamics of asset returns and macroeconomic quantities. Moreover, by explicitly relating firms' stock returns and cash flows to fundamental shocks, models with production connect the analysis of financial markets with the research on the origins of macroeconomic fluctuations
Financing Constraint and Firm-Level Investment Following a Financial Crisis in Indonesia
Choice of Financing Mode as a Stochastic Bounded Control Problem
In this note I analyze situations where an entrepreneur needs external financing from an outside investor in order to start an investment project that will yield a profit for two consecutive periods. The value of second-period profit is the entrepreneur's private information. I show that the choice of financing mode can be transformed into an optimal stochastic bounded control problem, where the state variable t represents the investor's first-period payoff and the control variable α can be interpreted in terms of the investor's residual profit rights. I then show that under certain general conditions such as the monotonicity and continuity of t (which have clear economic interpretations), an optimal contract is characterized by maximal α under low values of t and minimal α under high values of t. In economic terms this corresponds to debt
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