Using macroand micro-level data, we establish three stylized facts: (1) fluctuations in idiosyncratic uncertainty can have a large effect on aggregate investment; (2) the impact of uncertainty on investment occurs largely through changes in credit spreads; and (3) financial shocks—identified vis-à-vis orthogonal innovations to credit spreads—have a strong effect on investment, irrespective of t...

This paper studies optimal dynamic investment and ...nancial policy of the ...rm, if the interest rate on the ...rm’s debt depends on its capital structure. We characterize the optimal investment and ...nancing decisions and show how the incentive to invest and the market value of the ...rm are a¤ected by ...nancial considerations. Conditions are derived under which average Q remains a su¢cient...

The recent global financial crisis once again revealed the harmful effects of interest-based contracts in the conventional financial system. Islamic finance, as an alternative financial system, discourages interest rate and debt financing. This paper investigates the effects of two financial systems, namely the conventional and Islamic systems, on macroeconomic variables. To achieve this goal, ...

in the past few decades, capitalist economic system has witnessed different financial crises the most important of which is the 2008 financial crisis. the crisis had different causes that the main causes are innovations and financial assets without actual backing (real underlying asset) and their developing by financial institutions. namely, financial institutions, especially banks, developed t...