real options agency conflicts and optimal capital structure abstract we examine the impact of a stockholder bondholder conflict over the timing of the exercise of an investment option on firm value and corporate financial policy we find that an equity maximizing firm exercises the option too early relative to a value maximizing strategy and we show how this problem can be characterized as one of overinvestment in risky investment projects equityholders incentive to overinvest significantly decreases firm value and optimal leverage and significantly increases the credit spread of risky debt numerical solutions illustrate how the agency cost of overinvestment and its effect on corporate financial policy vary with firm and project characteristics

energy consumption and gdp in developing countries a cointegrated panel analysis in this paper we re investigate the co movement and the causality relationship between energy consumption and gdp in 18 developing countries using data for the period 1975 to 2001 recently developed tests for the panel unit root heterogeneous panel cointegration and panel based error correction models are employed the empirical results provide clear support of a long run cointegration relationship after allowing for the heterogeneous country effect the long run relationship is estimated using a full modified ols the evidence shows that long run and short run causalities run from energy consumption to gdp but not vice versa this result indicates that energy conservation may harm economic growth in developing countries regardless of being transitory or permanent

the effect of business risk on corporate capital structure theory and evidence under corporate and personal taxation we demonstrate that the relation between optimal debt level and business risk is roughly u shaped this result follows from the fact that the tax liability is an option portfolio that is long in the corporate tax option and short in the personal tax option therefore the net effect of a change in business risk on the optimal debt level depends upon the relative magnitudes of the resultant marginal changes in the values of these two options results of empirical tests offer support for the predicted u shaped relationship

bankruptcy risk and optimal capital structure this study finds shortcomings in empirical tests of the capital structure irrelevance hypothesis the alternative hypothesis is that firms choose value maximizing mixes of debt and equity on account of bankruptcy costs and the tax deductibility of interest payments based upon the cross sectional implications of the tax shelter bankruptcy cost hypothesis an alternative test of the irrelevance hypothesis is performed the test examines the relationship between failure rates and leverage ratios for 36 lines of business the results are inconsistent with the irrelevance hypothesis in their landmark paper modigliani and miller 26 demonstrate that under certain assumptions the market value of a firm is independent of its capital structure these assumptions include the absence of taxes transactions costs and bankruptcy costs recently miller 24 has argued that the introduction of corporate and personal taxes does not alter the capital structure irrelevance result in the absence of bankruptcy costs 1 the inclusion of bankruptcy costs generally considered in conjunction with the tax deductibility of interest payments has led others to conclude that capital structure will affect the value of the firm 2 in this case value maximizing firms may choose optimal capital structures consisting of both debt and equity there have been numerous attempts to discriminate empirically between the miller irrelevance mi hypothesis and the tax shelter bankruptcy cost ts bc hypothesis several are discussed in section i of this paper there it is argued that studies attempting to measure directly the effect of changes in capital structure on firm values are subject to serious complications and are unable to discriminate between the mi and ts bc hypotheses other studies focus on cross sectional implications of the mi and ts bc hypotheses the cross sectional tests are based on the assertion that bankruptcy costs may tend to induce firms with greater business risk to include less debt in their capital structures whereas the mi hypothesis does not predict such a relationship unfortunately the existence of positive bankruptcy costs is not sufficient to ensure that the ts bc hypothesis will predict the inverse relation

oil price effects on personal consumption expenditures abstract this paper uses a logistic smooth transition model to examine the impact of rising oil prices on personal consumption expenditures in open and industrialized economies the empirical results suggest a nonlinear and asymmetric relation between oil price changes and personal consumption expenditures in particular the effects of rising oil prices on personal consumption expenditures are greater than those of falling oil prices while oil price changes affect personal consumption expenditures via real balance effects smooth transition effects also come into play below a threshold value an increase in oil prices reduces personal consumption expenditures in other words in the face of uncertainty regarding future oil prices consumers initially rationally postpone spending however once oil prices above the threshold after a prolonged upward trend the prices of domestic production factors rise this fuels continued price hikes and further increases personal consumption expenditures until a cost pushed inflation takes hold due to differences in economic developments and structures the effects of rising oil prices vary from one country to another with different countries usually to different monetary policies from each other as a result personal consumption expenditures also show various patterns across countries

bounds test approach to cointegration and causality between nuclear energy consumption and economic growth in india abstract this paper attempts to examine the dynamic relationship between economic growth nuclear energy consumption labor and capital for india for the period 1969 2006 applying the bounds test approach to cointegration developed by pesaran et al 2001 we find that there was a short and a long run relationship between nuclear energy consumption and economic growth using four long run estimators we also found that nuclear energy consumption has a positive and a statistically significant impact on india s economic growth further applying the toda and yamamoto 1995 approach to granger causality and the variance decomposition approach developed by pesaran and shin 1998 we found a positive and a significant uni directional causality running from nuclear energy consumption to economic growth without feedback this implies that economic growth in india is dependent on nuclear energy consumption where a decrease in nuclear energy consumption may lead to a decrease in real income for a fast growing energy dependent economy this may have far reaching implications for economic growth india s economic growth can be frustrated if energy conservation measures are undertaken without due regard to the negative impact they have on economic growth

nuclear energy consumption and economic growth in nine developed countries this article attempts to test the causal relationship between nuclear energy consumption and real gdp for nine developed countries for the period 1971 2005 by including capital and labour as additional variables using a modified version of the granger causality test developed by toda and yamamoto 1995 we found a unidirectional causality running from nuclear energy consumption to economic growth in japan netherlands and switzerland the opposite uni directional causality running from economic growth to nuclear energy consumption in canada and sweden and a bi directional causality running between economic growth and nuclear energy consumption in france spain the united kingdom and the united states in spain the united kingdom and the usa increases in nuclear energy consumption caused increases in economic growth implying that conservation measures taken that reduce nuclear energy consumption may negatively affect economic growth in france japan netherlands and switzerland increases in nuclear energy consumption caused decreases in economic growth suggesting that energy conservation measure taken that reduce nuclear energy consumption may help to mitigate the adverse effects of nuclear energy consumption on economic growth in canada and sweden energy conservation measures affecting nuclear energy consumption may not harm economic growth

the effect of economic growth oil prices and the benefits of reactor standardization duration of nuclear power plant construction revisited the profitability of nuclear power plant investment is largely determined by the construction duration which directly impacts discounted cash flows debt and interest payments as well as variable costs such as labor this paper analyzes the key drivers of construction duration using survival models we focus especially on the strategic expectation formation of private and public utilities engaging in such highly risky megaprojects using a balanced dataset of explanatory variables and the iaea pris dataset of reactor construction starts between 1950 and 2013 we find that the expectation of rising oil prices and higher economic growth along with the higher per capita gdp of a country tend to reduce the time needed to grid connection we also identify the reactor models with the fastest construction duration

electricity consumption and economic growth a time series experience for 17 african countries abstract while the availability of electricity by itself is not a panacea for the economic and social problems facing africa the supply of electricity is nevertheless believed to be a necessary requirement for africa s economic and social development this paper tests the long run and causal relationship between electricity consumption per capita and real gross domestic product gdp per capita for 17 african countries for the period 1971 2001 using a newly developed cointegration test proposed by pesaran et al 2001 and using a modified version of the granger causality test due to toda and yamamoto 1995 the advantage of using these two approaches is that they both avoid the pre testing bias associated with conventional unit root and cointegration tests the empirical evidence shows that there was a long run relationship between electricity consumption per capita and real gdp per capita for only 9 countries and granger causality for only 12 countries for 6 countries there was a positive uni directional causality running from real gdp per capita to electricity consumption per capita an opposite causality for 3 countries and bi directional causality for the remaining 3 countries the result should however be interpreted with care as electricity consumption accounts for less than 4 of total energy consumption in africa and only grid supplied electricity is taken into account

on the asset substitution problem in their seminal paper modigliani and miller 11 12 demonstrate that if capital markets are perfect and investment policy is held constant the market value of the firm is independent of its financial decisions furthermore if capital markets are perfect stockholders have incentive to choose the investment policy which maximizes the market value of the firm see 6 motivated by this assumption the firm has been viewed as a black box namely as one homogeneous unit whose clear objective is to maximize its market value however in a growing body of recent literature see 1 2 7 9 13 and 14 researchers recognize that the firm in an imperfect capital market is a collection of groups whose interests can and do conflict jensen and meckling 9 study the roles of three important groups the owner manager the stockholders and the bondholders focusing on the potential costs resulting from divergence of interests among them they provide a theory of optimal capital structure in terms of reducing the costs of these conflicts

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

a note on the causal relationship between energy and gdp in taiwan abstract this paper re examines the causality between energy consumption and gdp by using updated taiwan data for the period 1954 1997 as a secondary contribution we investigate the causal relationship between gdp and the aggregate as well as several disaggregate categories of energy consumption including coal oil natural gas and electricity applying granger s technique we find bidirectional causality between total energy consumption and gdp we find further that different directions of cause exist between gdp and various kinds of energy consumption

comparative statics and perfect foresight in infinite horizon economies does a pure exchange economy with an infinite time horizon have determinate perfect foresight equilibria when there is a finite number of infinitely lived agents equilibria are generically determinate this is not true with overlapping generations of finitely lived agents we ask whether the initial conditions together with the requirement of convergence to a steady state locally determine an equilibrium price path in this framework there are many economies with isolated equilibria many with continua of equilibria and many with no equilibria at all with two or more goods in every period not only can the price level be indeterminate but relative prices as well furthermore such indeterminacy can occur whether or not there is fiat money and whether or not the equilibria are pareto efficient this paper considers whether infinite horizon economies have determinate perfect foresight equilibria this question is of crucial importance if instead equilibria are locally indeterminate not only are we unable to make comparative static predictions but the agents in the model are unable to determine the consequences of unanticipated shocks the idea underlying perfect foresight is that agents expectations should be the actual future sequence predicted by the model if the model does not make determinate predictions the concept of perfect foresight is meaningless we consider two extreme cases the first with a finite number of infinitely lived consumers and the second with an infinite number of finitely lived consumers an overlapping generations model both are models of stationary pure exchange economies no production including the storage of goods between periods can occur these models are unrealistic but are the easiest to study extensions of the results of this paper to models with production infinitely lived assets and mixtures of the two types of consumers are presented by muller and woodford 29 when there is a finite number of infinitely lived consumers we argue that equilibria are generically determinate this is because the effective number of equations determining equilibria is not infinite but equal to the number of agents minus one and must determine the marginal utility of income for all but one agent generically near an equilibrium these equations are independent and exactly determine the unknowns when there are infinitely many overlapping generations this reasoning breaks down an infinite number of equations is not necessarily sufficient to determine

interaction of debt agency problems and optimal capital structure theory and evidence e oeg more leverage always wcfsen tbe debt ageocy problem this paper ptesents a unified analysis that acconntb for both risk shifting and nixler iiivestiiient ddbt agency problems for firms with positive marginal volatility of investment defined as the change in cash flow volatility cone ponding to a change of itwestment scale equity holders risk shifting incentive will midgate the under investment problem this inqdies that coturary to ccmventional views the total agency cost of debt does not unifcsmly increase with leverage this model fiiither predicts tbat for mg growth firms in which the under investment problem is severe the optimal debt ratio is positively related to the marginal volatility of investmenl empirical results suppmt this prediction

technology debt and the exploitation of growth options abstract this paper analyzes the effect of the firm s technology on the agency costs of debt it is shown that for an important class of technologies agency costs are not a uniformly rising function of leverage for these technologies relatively high leverage can be consistent with a small tax subsidy the effect of technology on the exploitation of real options by a levered firm is examined the analysis provides a framework for a direct test of the agency cost of debt hypothesis using cost data

the causal relationship between energy resources and economic growth in brazil abstract this study investigates the causal relationship between clean and non clean energy consumption and economic growth in brazil over the period of 1980 2009 clean energy consumption at aggregated level of total renewable energy consumption and disaggregated levels of hydroelectric new renewables and nuclear energy consumption are tested within a production function framework a cointegration test reveals a long term equilibrium relationship between real output capital labor and renewable and non renewable energy consumption at aggregated level and a long term equilibrium relationship between real output capital labor and hydroelectric new renewables nuclear and fossil fuel energy consumption at disaggregated level the capital labor and new renewables elasticities of real output are positive and statistically significant other energy consumption item s elasticities are insignificant the results from error correction model reveal the interdependencies between new renewables nuclear fossil fuel and total non renewable energy consumption and economic growth the unidirectional causality from hydroelectric total renewable consumption to economic growth the substitutability between new renewables and fossil fuel consumption and the substitutability between new renewables and nuclear energy consumption additionally nuclear and new renewables energy consumption responds to bring the system back to equilibrium overall aggregated analysis may obscure the relationship between different types of clean energy consumption and economic growth

causal relationship between nuclear energy consumption and economic growth a multi country analysis this paper attempts to investigate the causal relationship between nuclear energy consumption and economic growth using the data from six countries among 20 countries that have used nuclear energy for more than 20 years until 2005 to this end time series techniques including the tests for unit roots co integration and granger causality are employed to argentina france germany korea pakistan and switzerland the main conclusion is that the causal relationship between nuclear energy consumption and economic growth is not uniform across countries in the case of switzerland there exists bi directional causality between nuclear energy consumption and economic growth this means that an increase in nuclear energy consumption directly affects economic growth and that economic growth also stimulates further nuclear energy consumption the uni directional causality runs from economic growth to nuclear energy consumption without any feedback effects in france and pakistan and from nuclear energy to economic growth in korea however any causality between nuclear energy consumption and economic growth in argentina and germany is not detected

asset substitution and the agencycosts of debt financing agency costs of debt have been advanced in the literature as an important consideration foroptimal corporate debt policies recently there have been some doubts concerning the theoretical foundations of the notion that these costs increase as the firm employs more debt in this paper we examine explicitly the incentive for asset substitution by solving endogenously for the optimal risk policy the results support the notion that more debt aggravates shareholders incentives to take risk we also investigate the marginal agency cost function and discuss conditions for interior optimal capital structure

a panel study of nuclear energy consumption and economic growth abstract this study examines the relationship between nuclear energy consumption and economic growth for sixteen countries within a multivariate panel framework over the period 1980 2005 pedroni s 1999 2004 heterogeneous panel cointegration test reveals there is a long run equilibrium relationship between real gdp nuclear energy consumption real gross fixed capital formation and the labor force with the respective coefficients positive and statistically significant the results of the panel vector error correction model finds bidirectional causality between nuclear energy consumption and economic growth in the short run while unidirectional causality from nuclear energy consumption to economic growth in the long run thus the results provide support for the feedback hypothesis associated with the relationship between nuclear energy consumption and economic growth

eliminating sunspot effects in overlapping generations models abstract we reappraise the robustness of sunspot effects in overlapping generations models azariadis s well known example economies have stationary deterministic fundamentals preferences technologies and endowments yet sunspots affect multiple equilibria and those equilibria are robust to common perturbations of underlying fundamentals however we find that judiciously splitting each of azariadis s goods into close substitutes eliminates sunspot effects and the remaining equilibrium is unique and deterministic forecasting thus becomes conclusive and there is no longer a role for government policy to stabilize excess volatility

nuclear energy consumption oil prices and economic growth evidence from highly industrialized countries this study utilizes the johansen cointegration technique the granger non causality test of toda and yamamoto 1995 the generalized impulse response function and the generalized forecast error variance decomposition to examine the dynamic interrelationship among nuclear energy consumption real oil price oil consumption and real income in six highly industrialized countries for the period 1965 2008 our empirical results indicate that the relationships between nuclear energy consumption and oil are as substitutes in the u s and canada while they are complementary in france japan and the u k second the long run income elasticity of nuclear energy is larger than one indicating that nuclear energy is a luxury good third the results of the granger causality test find evidence of unidirectional causality running from real income to nuclear energy consumption in japan a bidirectional relationship appears in canada germany and the u k while no causality exists in france and the u s we also find evidence of causality running from real oil price to nuclear energy consumption except for the u s and causality running from oil consumption to nuclear energy consumption in canada japan and the u k suggesting that changes in price and consumption of oil influence nuclear energy consumption finally the results observe transitory initial impacts of innovations in real income and oil consumption on nuclear energy consumption in the long run the impact of real oil price is relatively larger compared with that of real income on nuclear energy consumption in canada germany japan and the u s

virtual determinacy in overlapping generations models we reappraise the significance and robustness of indeterminacy in overlapping generations models in any of gale s example economies with an equilibrium that is not locally unique for instance perturbing the economy by judiciously splitting each of gale s goods into two close substitutes restricts that indeterminacy to each period s allocation of consumption between those substitutes in particular prices interest rates the commodity value of nominal savings including money and utility levels become determinate any indeterminacy of equilibrium consumption in the perturbed economy is thus insignificant to consumers and some forecasting and comparative statics policy exercises become possible