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on Corporate Finance |
| By: | Julio Dávila (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CORE - Université Catholique de Louvain) |
| Abstract: | I show in this paper that in an overlapping generations economy with production à la Diamond (1970) in which the agents can only save in terms of capital (i.e. with not asset bubbles à la Tirole (1985) or public debt as in Diamond (1965)), there is a period-by-period balanced fiscal policy supporting a steady state allocation that Pareto-improves upon the laissez-faire competitive equilibrium steady state (whithout having to resort to intergenerational transfers) if there is no first generation or the economy starts there. A transition from the competitive equilibrium steady state to this other allocation is also Pareto-improving if the former is dynamically inefficient, but even in the dynamically efficient case if the elasticity of output to capital is high enough. This intervention allows every subsequent generation to attain, as a competitive equilibrium outcome, the highest utility attainable at a steady state through the existing markets for the consumption good and the production factors. The active fiscal policy consists of taxing (or subsidizing, in the dynamically efficient case) linearly the returns to capital, while balancing the budget period by period through a lump-sum transfer (or tax, respectively) on second period income. This policy does not finance any public spending, since there is none in the model. The only purpose of the intervention is to decentralize as a competitive equilibrium the steady state allocation that maximizes the utility of the representative agent among all steady state allocations attainable through the existing markets. |
| Keywords: | Taxation of capital, overlapping generations. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00348923_v1&r=cfn |
| By: | Q. Farooq Akram (Norges Bank (Central Bank of Norway)); Dagfinn Rime (Norges Bank (Central Bank of Norway)); Lucio Sarno (Cass Business School and CEPR) |
| Abstract: | This paper investigates the validity of the law of one price (LOP) in international financial markets by examining the frequency, size and duration of inter-market price di erentials for borrowing and lending services (`one-way arbitrage'). Using a unique data set for three major capital and foreign exchange markets that covers a period of more than seven months at tick frequency, we nd that the LOP holds on average, but numerous economically signi cant violations of the LOP arise. The duration of these violations is high enough to make it worth- while searching for one-way arbitrage opportunities in order to minimize borrowing costs and/or maximize earnings on given funds. We also document that such opportunities decline with the pace of the market and increase with market volatility. |
| Keywords: | Law of one price, One-way arbitrage, Foreign exchange microstructure |
| JEL: | F31 F41 G14 G15 |
| Date: | 2008–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2008_19&r=cfn |
| By: | Dean Baker |
| Abstract: | The recent economic turmoil has generated renewed interest in a financial transactions tax (FTT). While such a tax will be vigorously opposed by the financial industry, it offers a very attractive mechanism for raising revenue that is arguably efficiency-enhancing. Calculations based on 2000 trading volumes showed that a set of scaled transactions taxes, imposed on transfers of stock and other financial assets, could raise more than $100 billion a year, even assuming large reductions in trading volume. |
| Keywords: | financial taxes, financial transactions, economic crisis, financial crisis |
| JEL: | G G1 G18 G2 G24 G28 G3 G38 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2008-36&r=cfn |
| By: | Sandra Poncet; Walter Steingress; Hylke Vandenbussche |
| Abstract: | This paper uses a unique micro-level data-set on Chinese firms to test for the existence of a "political-pecking order" in the allocation of credit. Our findings are threefold. Firstly, private Chinese firms are credit constrained while State-owned firms and foreign-owned firms in China are not; Secondly, the geographical and sectoral presence of foreign capital alleviates credit constraints faced by private Chinese firms. Thirdly, geographical and sectoral presence of state firms aggravates financial constraints for private Chinese firms (“crowding out”). Therefore it seems that ongoing restructuring of the state-owned sector and further liberalization of foreign capital inflows in China can help to circumvent financial constraints and can boost the investment of private firms. |
| Keywords: | Investment-cashflow sensitivity, China, firm level data, foreign direct investment |
| JEL: | E22 G32 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:22608&r=cfn |