a r t i c l e i n f o We re-evaluate the cash flow–investment relation from a new angle in a setting where the firm can access capital markets and faces different investment opportunity sets. Instead of replying on cash flow, we introduce other forms of finance to interact with investment. We find that financial variables enter significantly into the investment regressions at different timing. ...

The national estimates of fixed capital comprise four vital measures: investment, the most dynamic component of GDP; the gross capital stock, which determines national output capacity; the net stock, the value of future capacity and a large part of measured national wealth; and capital consumption, the annual amount by which the latter shrinks, through wear-and-tear and obsolescence. Yet, it is...

The Bernanke-Blinder credit-view model is expanded to encompass a small, open economy with fixed exchange rates. In contrast to conventional wisdom and traditional models, monetary policy is resurrected as a stabilization tool. Further, various financial sector shocks are shown to have real aggregate demand effects. We show that independent monetary policy actions can ha ve substantive impacts ...

In response to the deficiencies in financial regulation revealed by the global financial crisis, the Basel Committee on Banking Supervision (BCBS) is proposing to introduce a new capital regulatory standard to improve the banks' ability to absorb shocks arising from financial and economic stress. The regulatory capital requirements in the third of Basel Accords is conceptually similar to the mi...

This paper examines how dollarization affects wages and employment in the Mexican labor market. Dollarization is modeled as a fixed real exchange rate and also as a potentially increased inflow of capital from abroad. The effects of dollarization depend upon whether adopting a fixed exchange rate reduces the rate of return on emigration and helps to attract foreign capital. The paper investigat...