A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
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Results 230 resources
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The reversal interest rate is the rate at which accommodative monetary policy reverses and becomes contractionary for lending. We theoretically demonstrate its existence in a macroeconomic model featuring imperfectly competitive banks that face financial frictions. When interest rates are cut too low, further monetary stimulus cuts into banks' profit margins, depressing their net worth and curtailing their credit supply. Similarly, when interest rates are low for too long, the persistent drag on bank profitability eventually outweighs banks' initial capital gains, also stifling credit supply. We quantify the importance of this mechanism within a calibrated New Keynesian model.
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For a firm that cannot raise external funds, cash on hand serves as precautionary saving. We derive a closed-form expression for the target level of cash on hand in the presence of persistent cash flows. Contrary to conventional wisdom, a mean-preserving increase in the volatility of cash flow can decrease this target. Over the set of admissible parameter values, the average impact of volatility on the target is zero. Endogenous selection, reflecting termination of firms that run out of cash, leads to a positive average impact of volatility on the target level of cash, consistent with empirical findings.
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We study optimal monetary policy in an analytically tractable heterogeneous agent New Keynesian model with rich cross-sectional heterogeneity. Optimal policy differs from a representative agent benchmark because monetary policy can affect consumption inequality, by stabilizing consumption risk arising from both idiosyncratic shocks and unequal exposures to aggregate shocks. The trade-off between consumption inequality, productive efficiency, and price stability is summarized in a simple linear-quadratic problem yielding interpretable target criteria. Stabilizing consumption inequality requires putting some weight on stabilizing the level of output, and correspondingly reducing the weights on the output gap and price level relative to the representative agent benchmark.
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Climate scientists project rising average temperatures and increasing frequency of temperature extremes. We study how extreme temperatures affect corporate profitability across different industries and whether sell-side analysts understand these relationships. We combine granular daily data on temperatures across the continental U.S. with locations of public companies’ establishments and build a panel of quarterly firm-level temperature exposures. Extreme temperatures significantly impact earnings in over 40% of industries, with bi-directional effects that harm some industries while others benefit. Analysts and investors do not immediately react to observable intra-quarter temperature shocks, though earnings forecasts account for temperature effects by quarter-end in many industries.
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We show that production networks are important for the transmission of unconventional monetary policy. Firms with bonds eligible for purchase under the European Central Bank’s Corporate Sector Purchase Program act as financial intermediaries by extending additional trade credit to their customers. The increase in trade credit is pronounced from core countries to periphery countries and for financially constrained customers. Customers then increase investment and employment in response to the increased trade financing, whereas suppliers expand their customer base, contributing to upstream industry concentration. Our findings suggest that trade credit redistributes the effects of monetary policy across regions and firms.
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Open-end mutual funds can use redemption in kind to satisfy investor redemptions by delivering securities instead of cash. We find that funds that reserve their rights to redeem in kind experience less redemption after poor performance. Evidence from actual in-kind transactions reveals several unique mechanisms for redemption in kind to mitigate fund runs, including the delivery of more illiquid stocks and stocks with greater tax overhang. Funds suffer less from the adverse impact of outflows on their performance. However, redeeming investors bear significant liquidation costs when they sell securities, costs associated with destabilization in the prices of these securities.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
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We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data, where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model's qualitative predictions, we find a fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a reduction in the innovation response of firms to demand shocks just below the threshold. Regulation reduces aggregate innovation by 5.7 percent.
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Romanian households could choose schools with one standard deviation worth of additional value added. Why do households leave value added "on the table"? We study two possibilities: (i) information and (ii) preferences for other school traits. In an experiment, we inform randomly selected households about schools' value added. These households choose schools with up to 0.2 standard deviations of additional value added. We then estimate a discrete choice model and show that households have preferences for a variety of school traits. As a result, fully correcting households' beliefs would eliminate at most a quarter of the value added that households leave unexploited.
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We develop a methodology to estimate robust city-level vehicular speed indices, exactly decomposable into uncongested speed and congestion. We apply it to 180 Indian cities using 57 million simulated trips measured by a web mapping service. We verify the reliability of our simulated trips using a number of alternative data sources, including data on actual trips. We find wide variation in speed across cities that is driven more by differences in uncongested speed than congestion. Denser and more populated cities are slower, only in part because of congestion. Urban economic development is correlated with faster speed despite worse congestion.
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We analyze the consequences of noisy information aggregation for investment. Market imperfections create endogenous rents that cause overinvestment in upside risks and underinvestment in downside risks. In partial equilibrium, these inefficiencies are particularly severe if upside risks are coupled with easy scalability of investment. In general equilibrium, the shareholders' collective attempts to boost value of individual firms leads to a novel externality operating through price that amplifies investment distortions with downside risks but offsets distortions with upside risks.
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