Article history: Received 24 September 2008 Received in revised form 19 January 2009 Accepted 15 April 2009 Available online 3 May 2009 We study a model in which future financing constraints lead firms to have a preference for investments with shorter payback periods, investments with less risk, and investments that utilize more pledgeable assets. The model also shows how investment distortions...

A wide body of empirical evidence, based on randomized experiments, finds that 20-40 percent of fiscal stimulus payments (e.g. tax rebates) are spent on nondurable household consumption in the quarter that they are received. We develop a structural economic model to interpret this evidence. Our model integrates the classical Baumol-Tobin model of money demand into the workhorse incomplete-marke...

The current financial turmoil has generated considerable discussion of liquidity. Moreover, it has been widely reported that the Federal Reserve played a major role in supplying liquidity to financial markets during this distressed time. This article describes two ways in which the Fed has supplied liquidity since late 2007. The first is traditional: The Fed supplies liquidity by providing cred...

We consider the stochastic process of the liquid assets of an insurance company assuming that the management can control this process in two ways: first, the risk exposure can be reduced by affecting reinsurance, but this decreases the premium income. Second, a dividend has to be paid out to the shareholders. The aim is to maximize the expected discounted dividend pay-out until the time of bank...

This brief explores the role that savings can play in alleviating material hardship for low-income households. We use longitudinal household data from the Survey of Income and Program Participation (SIPP) to examine whether modest liquid assets—sometimes referred to as precautionary or emergency savings, a rainy-day fund, or ready money—can protect against impending hardship for low-income hous...

Although existing theories predict a causal link between informational frictions in financial markets and a firm’s choice of asset liquidity, the lack of an exogenous and clean measure of informational frictions hinders the precise identification of this link. Using the discontinuous requirement of financial reporting introduced by Section 404 of the Sarbanes-Oxley Act, we identify a causal eff...

companies must publish financial reports on time. when market information is more important and this information is used to shape more effective decision-making. although most companies, financial reports required by the authorities at intervals determined speak but at the same time, it can be claimed that the delay in publishing the financial reports of a company to another company, the differ...

There are good theoretical reasons why transfers from parents are likely to be important around the time of the first home purchase. Transactions costs associated with trading houses make people with increasing income paths prefer to buy a house that is more expensive than what matches their current income. This together with a down-payment constraint make some first-time house owners borrow to...

This paper documents the extent to which homeowners use housing equity to smooth their consumption over time. Unlike drawing down other forms of saving, accessing accumulated home equity can be quite costly. Theoretically and empirically, a key distinction can be drawn between those refinancing their home mortgage to improve their wealth position from those who had a consumption smoothing motiv...