Financial choice in a non-Ricardian model of trade

We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, welfare, aggregate output, gains from trade, and the real exchange rate in a small open economy. Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate. Increasing the degree of trade openness increases firms' relative demand for bond versus bank financing. We identify a financial switching channel for gains from trade where increasing access to export markets allows firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital.Trade ; Bank loans ; Bond market

A Theory of Banks, Bonds, and the Distribution of Firm Size

Does targeted financial development favor small firms or large ones? And how do resulting changes in the distribution of firm size affect aggregate outcomes? We assess the macroeconomic implications of known stylized facts from the finance literature regarding firm size and financial frictions for the real economy. In an era of intense policy debate over the role of market-based finance in the macroeconomy, we find that considering the entire distribution of firm size is key to accurately assess the effects of targeted financial policies on macroeconomic outcomes and firm behavior.heterogeneity, bank, bond, distribution of firm size

A theory of banks, bonds, and the distribution of firm size

We draw on stylized facts from the finance literature to build a model where altering the relative costs of bank and bond financing changes the entire distribution of firm size, with implications for the aggregate capital stock, output, and welfare. Reducing transactions costs in the bond market increases the output and profits of mid-sized firms at the expense of both the largest and smallest firms. In contrast, reducing the frictions involved in bank lending promotes the expansion of the smallest firms while all other firms shrink, even as it increases the profitability of both small and mid-size firms. Although both policies increase aggregate output and welfare, they have opposite effects on the extensive margin of production-promoting bond issuance causes exit while cheaper bank credit induces entry. When reducing transactions costs in one market, the resulting increase in output and welfare are largest when transactions costs in the other market are very high.Bond market ; Bank loans

Entry, Multinational Firms, and Exchange Rate Volatility

Recent discussions of exchange rate determination have emphasized the possible role of foreign direct investment in influencing exchange rate behavior. Yet, there are few existing models of multinational enterprises (MNEs) and endogenous exchange rates. This paper demonstrates that the entry decisions of MNEs can influence the volatility of the real exchange rate in countries were there are significant costs involved in maintaining production facilities, even when prices are perfectly flexible. For empirically plausible parameters, MNE activity can make the exchange rate much more volatile than relative consumption.exchange rate volatility, foreign direct investment, market entry

Synthetic biology: enormous possibility, exaggerated perils

The following essay was written by a freshman undergraduate student majoring in Bioengineering at the University of Maryland, Mr. Zachary Russ. Mr. Russ was one of 94 students who submitted a 1000 to 1200 word essay to the 3rd Annual Bioethics Essay Contest sponsored by the Institute of Biological Engineering (IBE). A group of professionals in Biological Engineering assessed and ranked the essays in a blinded process. Five semi-finalists were invited to present their essays at a session at the annual meeting of IBE in Chapel Hill, NC on March 8, 2008. Five judges scored the presentations at the annual meeting and selected Mr. Russ's contribution as the overall winner (1st Place). Below is his essay

Mapping the moral boundaries of biological engineering

The following essay was written by a sophomore undergraduate student majoring in Bioengineering at the University of Maryland, Mr. Zachary Russ. Mr. Russ was one of 174 students who submitted a 1000–1200 word essay to the 4th Annual Bioethics Contest sponsored by the Institute of Biological Engineering (IBE). A group of professionals in Biological Engineering assessed and ranked the essays in a blinded process. Five semi-finalists were invited to present their essays at a session at the annual meeting of IBE in Santa Clara, CA on March 21, 2009. Five judges scored all the presentation at the annual meeting and selected Mr. Russ's contribution as the overall winner (1st Place)

Chemical Facility Information System for Hawaii (CFISH) Final Report

The computer program, the Computer-Aided Management of Emergency Operations (known as CAMEO), contains detailed information about more than 3,000 chemicals, allows air plume modeling, and contains databases with much related information. While CAMEO provides a ready base of information on hazardous materials, it is not designed for use by the general public. In the interest of making the chemical information contained in CAMEO available to the private citizen and thereby meeting the public's right-to-know objectives as expressed under SARA TItle lIl, the Department of Health with funds provided by the Environmental Protection Agency has contracted with the University of Hawaii, Environmental Center, to develop a user-friendly computer program based on the chemical and facility data contained in CAMEO. The new program, CFISH, for Chemical Facility Information System for Hawaii, is designed to facilitate public awareness of the storage, location, use, or accidental spillage of hazardous chemicals in the community. The CFISH program permits the public to examine some 590 chemical facilities within the State with regard to what chemicals are used in their operations, the amounts released to the environment as a routine component of that use, and records of any spills or other accidental releases. The following report reviews our efforts to develop the Chemical Facility Information System for Hawaii (CFISH) and the means taken to educate the public on its content and availability .Hawaii State Department of Health/Office of Hazard Evaluation & Emergency Response U.S. Environmental Protection Agenc

A Theory of Banks, Bonds, and the Distribution of Firm Size

We draw on stylized facts from the finance literature to build a model where altering the relative costs of bank and bond financing changes the entire distribution of firm size, with implications for the aggregate capital stock, output, and welfare. Reducing transactions costs in the bond market increases the output and profits of mid-sized firms at the expense of both the largest and smallest firms. In contrast, reducing the frictions involved in bank lending promotes the expansion of the smallest firms while all other firms shrink, even as it increases the profitability of both small and mid-size firms. Although both policies increase aggregate output and welfare, they have opposite effects on the extensive margin of production---promoting bond issuance causes exit while cheaper bank credit induces entry. When reducing transactions costs in one market, the resulting increase in output and welfare are largest when transactions costs in the other market are very high.

Financial Choice in a Non-Ricardian Model of Trade

We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, welfare, aggregate output, gains from trade, and the real exchange rate in a small open economy. Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate. Increasing the degree of trade openness increases firms' relative demand for bond versus bank financing. We identify a financial switching channel for gains from trade where increasing access to export markets allows firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital.