We analyze the impact of changes in thin capitalization rules on corporations' capital structure. Thin capitalization rules prevent rms from deducting excessive interest expenses from their tax base. As of 2008, Germany has severely changed its thin capitalization rule by targeting interest payments instead of debt to equity ratios. The new rule has primarily been introduced to prohibit tax avo...

Credit portfolios, as for instance Collateralized Debt Obligations (CDO’s) consist of credits that are heterogeneous both with respect to their ratings and the involved industry sectors. Estimates for the transition probabilities for different rating classes are well known and documented. We develop a Markov Chain model, which uses the given transition probability matrix as the marginal law, bu...

On the heels of prominent corporate downgrades in the U.S., the haircut unwinding of exposed collateralized debt obligations reverberated in a drumbeat of warnings and mounting regulatory unease about current risk measurement standards of derivatives and their impact on financial stability. The subsequent drumbeat of warnings about probable knock-on effects of leveraged structured claims on fin...

We analyze the role of government intertemporal budget policies in a growing open economy including nominal assets in the presence of an upward sloping supply of debt. This introduces transitional dynamics that influence the effects of government policy instruments on the long term fiscal liability. In particular, shifts in capital income taxes can lead to dynamic scoring effects through the ev...

This paper presents the methodology for the computation of capital flight and reports new estimates of the magnitude and timing of capital flight from 33 sub-Saharan African countries from 1970 to 2004. Our methodology calculates capital flight as the residual difference between inflows and outflows of foreign exchange recorded in the balance of payments, with corrections for the magnitude of e...

The external balance sheets of many emerging market countries are distinguished by their holdings of assets primarily in the form of foreign debt and foreign exchange reserves, while their liabilities are predominantly equity, either FDI or portfolio. In this paper we investigate the claim that this composition served as a buffer for the emerging markets during the global financial crisis of 20...

Biodiversity conservation projects confront immediate and escalating threats with limited funding. Conservation theory suggests that the best response to the species extinction crisis is to spend money as soon as it becomes available, and this is often an explicit constraint placed on funding. We use a general dynamic model of a conservation landscape to show that this decision to "front-load" ...

Why did some developing country governments accumulate large foreign debt burdens in the late twentieth century while others did not? I hypothesize that variation in foreign indebtedness is a product of the impact of regime type on government borrowing and investment decisions. Autocratic regimes will borrow more from foreign lenders and invest fewer of these funds in public goods than democrat...

Recent sovereign defaults in emerging countries are accompanied by interest rate spikes and deep recessions. This paper develops a small open economy model to study default risk and its interaction with output, consumption, and foreign debt. Default probabilities and interest rates depend on incentives for repayment. Default occurs in equilibrium because asset markets are incomplete. The model ...

Note: The following appendices will not appear in the Code of Federal Regulations. Commodity Futures Trading Commission (CFTC) Appendices to Treatment of Certain Collateralized Debt Obligations Backed Primarily by Trust Preferred Securities With Regard to Prohibitions and Restrictions on Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds—Commission Voting Summary...