In this paper Efficient Importance Sampling (EIS) is used to perform a classical and Bayesian analysis of univariate and multivariate Stochastic Volatility (SV) models for financial return series. EIS provides a highly generic and very accurate procedure for the Monte Carlo (MC) evaluation of high-dimensional interdependent integrals. It can be used to carry out ML-estimation of SV models as we...

Both financing and risk management involve promises to pay that need to be collateralized, resulting in a financing versus risk management trade-off. We study this trade-off in a dynamic model of commodity price risk management and show that risk management is limited and that more financially constrained firms hedge less or not at all. We show that these predictions are consistent with the evi...

Recent work in the real options approach to investment has argued that firms face significant opportunity costs when entry costs are largely irreversible, and these costs equal the value of an option to defer investment. This study seeks to examine empirically these claims by investigating the interactive effects of uncertainty and irreversibility on the likelihood of entry into new business by...

Emerging markets exhibit high returns to capital, the ‘Lucas Paradox,’ alongside volatile growth rate regimes. We investigate the role of long-run risks, i.e., risk due to fluctuations in economic growth rates, in leading to return differentials across countries. We take the perspective of a US investor and outline an empirical strategy to identify risky growth shocks and quantify their implica...

A standard assumption of structural models of default is that firms assets evolve exogenously. In this paper, we document the importance of accounting for investment options in models of credit risk. In the presence of financing and investment frictions, firm-level variables which proxy for asset composition carry explanatory power for credit spreads beyond leverage. As a result, cross-sectiona...

This paper presents estimates of the impact of exchange rate movements on the industry-level price of investment goods using a panel of OECD countries. An exchange rate depreciation (appreciation) causes a significant rise (fall) in the prices of the investment goods used by most industries, but the magnitude of this effect differs greatly across sectors. A currency depreciation causes a strong...

Imperfect altruism between generations may lead to insufficient capital accumulation. We study the welfare consequences of taxing the rent on a fixed production factor, such as land, in combination with age-dependent redistributions as a remedy. Taxing rent enhances welfare by increasing capital investment. This holds for any tax rate and recycling of the tax revenues except for combinations of...

In Lentz and Mortensen (2005), we formulate and estimate a market equilibrium model of endogenous growth through product innovation in the spirit of Klette and Kortum (2004). In this paper, we provide a quantitative solution to the social planner’s problem in the modeled environment. We find that the optimal growth rate is over three times larger than its value in market equilibrium and that th...

Our main result is that dynamic new-Keynesian (DNK) models with firm-specific capital feature a substantial amount of endogenous price stickiness. We use this insight to assess the desirability of alternative interest rate rules, and make the case for combining active monetary policy with interest rate smoothing and/or some responsiveness of the nominal interest rate to real economic activity. ...

In this era of globalization, human capital as is a determining factor in ensuring social and cultural progress. Human able to develop itself contribute understanding the problems that exist science high technology, social, modern economy. creating quality education, it determined by role capital, namely teacher holder world education who has ability intellectual transfer knowledge. The will de...