renewable energy policies and initiatives for a sustainable energy future in malaysia abstract effective policies and incentive on renewable energy re is critical to promote low carbon economy and society in the future re was first introduced in the country s energy mix through the fifth fuel policy which was formulated under the eighth malaysia plan 2001 2005 to reduce dependency on fossil fuel and to address the rising global concern on climate change this paper addresses the re progress and achievement over the past 10 years and discusses the key policies for re programmes funding schemes and incentives that has been introduced by the government of malaysia to develop and promote the utilisation of re the recent re mechanisms under the tenth malaysia plan 2011 2015 will also be highlighted

dollarization bailouts and the stability of the banking system central bank policy suffers from time inconsistency when facing a banking crisis a bailout is optimal ex post but ex ante it should be limited to control moral hazard dollarization provides a credible commitment not to help at the cost of not helping even when it would be ex ante optimal to do so dollarization is good when the costs of establishing a reputation for the central bank are high monitoring effort by the banker is important in improving returns and when the cost of liquidating projects is moderate however a very severe moral hazard problem could make dollarization undesirable the results obtained are applied to assess the desirability of dollarization in a range of countries and the potential role of the imf as international lolr we would never put ourselves in a position where we envisioned actions that we would take would be of assistance to the rest of the world but to the detriment of the united states alan greenspan to a congressional panel in 1999 iht january 19 2000

debt in industry equilibrium this article shows 1 how entry and exit of firms in a competitive industry affect the valuation of securities and optimal capital structure and 2 how given a trade off between tax advantages and agency costs a firm will optimally adjust its leverage level after it is set up we derive simple pricing expressions for corporate debt in which the price elasticity of demand for industry output plays a crucial role when a firm optimally adjusts its leverage over time we show that total firm value comprises the value of discounted cash flows assuming fixed capital structure plus a continuum of options for marginal increases in debt article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

development policy to increase the competitiveness of renewable energy sector companies in a territory like corsica france abstract the past decade has seen the renewable energy sector really take off driven by now well structured industries starting to mobilize now mature technologies this developmental shift towards renewable energy has been framed by different policy measures that nevertheless share the same core rationale climate change among the pro renewables policies adopted by france the deployment of competitive clusters has proved an effective tool for leveraging the growth of renewables business clusters are geographically concentrated economic structures assuring the often tenuous link between efficient national industrial policy efforts and regional planning and branding issues from this perspective the logic of synergy by connecting global to local issues remains to be created around a new paradigm regional attractiveness place branding in today s fast globalizing world the much hyped concept of place branding has become critical for regions in fierce global competition to capture and secure geographically mobile investment in this context promoting and attracting inward investment is a multidimensional challenge where business clusters have a pivotal role to play corsica a small island economy represents a case in point target of analysis through its long standing padduc project french decentralization policy on corsica under the law dated 22 january 2002 and the capenergies business cluster a key link in the technological research strand entrusted with the overriding role of leading the island s transition toward decentralized energy independency after highlighting the innovative technological approach of promoting socio economic fabric as one of the key foundations to structured economic development and regional branding this paper goes on to outline the joint effect impacts of development of the capenergies competitive cluster in tandem with the process to find technology centred solutions to drive development of the renewable energy industry in an island economy like corsica

capital markets and the exchange rate with special reference to the dollarization debate in latin america the paper reviews the main challenges faced by policymakers in emerging market economies em in light of recent financial crises and taking into account salient factors like the existence of partial dollarization imperfect credibility weak financial systems and contagion the standard theory of optimal currency areas is discussed and criticized for omitting the above factors when these factors are taken into account an extreme foreign exchange regime like dollarization is shown to become much more attractive the paper discusses the pros and cons of dollarization and among other things shows that the lack of a lender of last resort is not necessarily a major drawback in em the paper also discusses inflation targeting it in a formal model it is shown that it could be subject to credibility problems similar to those found in exchange rate based stabilization programs

determinants of capital structure evidence from a major developing economy a major shortcoming of capital structure studies on developing economies is that they generally restrict their analyses to large publicly traded manufacturing firms consequently we know little about the applicability of various capital structure theories to firms that are private small and or outside the manufacturing industry in these economies in this paper we conduct a comparative test of the trade off and pecking order theories using a comprehensive firm level dataset that covers manufacturing non manufacturing small large publicly traded and private firms in a major developing economy turkey the trade off theory provides a better description of the capital structures of all firm types than the pecking order theory moreover the trade off theory appears to be particularly suitable for understanding the financing choices of large private firms in the non manufacturing sector and when the economic environment is relatively stable by contrast pecking order theory is most useful when it comes to small publicly traded manufacturing firms especially when the economic environment is relatively unstable

capital structure and product market rivalry how do we reconcile theory and evidence this paper presents empirical evidence on the interaction of capital structure decisions and product market behavior we examine when firms recapitalize and increase the proportion of debt in their capital structure the evidence in this paper shows that firms with low productivity plants in highly concentrated industries are more likely to recapitalize and increase debt financing this finding suggests that debt plays a role in highly concentrated industries where agency costs are not significantly reduced by product market competition following the empirical evidence we introduce the strategic investment effects of debt and argue that this effect in conjunction with agency costs appears to fit the data this abstract was borrowed from another version of this item

the debt equity choice when firms adjust their capital structures they tend to move toward a target debt ratio that is consistent with theories based on tradeoffs between the costs and benefits of debt in contrast to previous empirical work out tests explicitly account for the fact that firms may face impediments to movements toward their target ratio and that the target ratio may change over time as the firm s profitability and stock price change a separate analysis of the size of the issue and repurchase transactions suggests that the deviation between the actual and the target ratios plays a more important role in the repurchase decision than in the issuance decision

financial globalization and debt maturity in emerging economies this paper studies how financial globalization affects debt structure in emerging economies we find that by accessing international markets firms increase their long term debt and extend their debt maturity in contrast with financial liberalization long term debt decreases and the maturity structure shifts to the short term for the average firm these effects are stronger in economies with less developed domestic financial systems the evidence is consistent with financial integration having opposite effects on the firms that are able to integrate with world markets and obtain financing globally relative to the firms that rely on domestic financing only

exchange rate based stabilization with endogenous fiscal response abstract this paper studies the dynamics of inconsistent exchange rate based stabilization policy a policy that fixes the exchange rate without an underlying fiscal adjustment to ensure that the exchange rate policy is sustainable in the long run in a model where the perception that exchange rate policy temporarily leads to an initial expansion in consumption that generates an increase in tax revenues large enough to eliminate the ex ante fiscal deficit therefore an ex ante inconsistent stabilization program displays ex post all the features of a fiscally consistent one i e a fixed exchange rate and no fiscal deficit in contrast to the standard results where the inconsistency between fiscal and exchange rate policy leads to a steady loss of international reserves and culminates in a krugman type balance of payments crisis this model predicts that along the path towards the balance of payments crisis the economy displays no fiscal deficit and enjoys increasing international reserves

financial signalling and the deep pocket argument this article provides a formal representation of telser s 1966 deep pocket argument by considering a model in which the entrant s and the incumbent s financial structures are endogenous the entrant s financial vulnerability may be explained by informational asymmetries in financial markets financiers are uncertain of the entrant s true value but they know the incumbent s true worth both firms have to finance a fixed expenditure before starting production in equilibrium the incumbent finances with equity while the high value entrant comes into the market heavily leveraged compared with the incumbent this provides an incentive for the incumbent to engage in predatory practices such as a price war to exhaust the entrant financially and cause his bankruptcy

hedging and financial fragility in fixed exchange rate regimes currency crises that coincide with banking crises tend to share at least three elements first banks have a currency mismatch between their assets and liabilities second banks do not completely hedge the associated exchange rate risk third there are implicit government guarantees to banks and their foreign creditors this paper argues that the first two features arise from banks optimal response to government guarantees we show that guarantees completely eliminate banks incentives to hedge the risk of a devaluation our model also articulates one reason why governments might be tempted to provide guarantees to bank creditors guarantees lower the domestic interest rate and lead to a boom in economic activity but this boom comes at the cost of a more fragile banking system in the event of a devaluation banks renege on foreign debts and declare bankruptcy

evidence on the impact of the agency costs of debt on corporate debt policy in the last several years there has been increased theoretical emphasis on the agent principal problem as it applies to corporate finance this paper is an attempt to empirically test for the presence of the agency costs and their relation to the debt policy of corporations we find that firms with higher insider ownership have greater debt ratios than firms with lower insider ownership which may be explained by the agency costs of debt and or the agency costs of equity other regression results tend to confirm the theoretically optimal relationships put forth by myers we find that high growth firms use less debt rather than more debt high operating risk firms use more debt rather than less debt and firm size appears to be uncorrelated to the level of debt

does the worldwide shift of fdi from manufacturing to services accelerate economic growth a gmm estimation study abstract we examine the effect of manufacturing and service fdi foreign direct investment on their own sector growth the spillover to the other sectors and the overall economy in host countries we identify significant sectoral and inter industry spillover effects with various data classifications and types of fdi flows evidence reveals that growth effect of manufacturing fdi operates by stimulating activity in its own manufacturing sector and is prevalent in latin america caribbean in europe central asia middle to low income countries and economies with large industry share a surge of service fdi is likely to spur growth in service industries but hurt activity in manufacturing industries financial service fdi enhances growth in south east asia and the pacific high income countries and service based economies by stimulating activity in both manufacturing and service sectors however nonfinancial service fdi drains resources and hurts manufacturing industry in the same group of countries we conclude that a shift from manufacturing to service fdi is likely to lead to deindustrialization in certain regions and types of economies if this shift is spearheaded by nonfinancial fdi

the role of public policy in optimizing renewable energy development in the greater southern appalachian mountains abstract this research presents a third component of a comprehensive decision support system for energy planning that allows for combining existing electricity generating capabilities with increased use of renewable energy sources it focuses on energy planning at the regional level and concentrates specifically on the greater southern appalachian mountains of the eastern united states a region that was chosen for analysis not only due to its heavy dependence on coal for electricity but also because of its potential for increased use of wind and solar power previous research used a geographic information system gis model for identifying renewable energy potential to provide input data for a multi objective linear programming molp model to determine the optimal constrained mix of renewable energy sources and existing fossil fuel facilities by balancing annual generation costs against the corresponding greenhouse gas emissions this new component of the system analyzes three potential public policies renewable portfolio standard carbon tax and renewable energy production tax credit that have been used to foster increased renewable energy usage these policies require minor modifications to the molp model for implementation the results of these policy cases were then analyzed to determine the impact that these policies have on generation cost and pollution emissions within the region

technological learning and renewable energy costs implications for us renewable energy policy abstract this paper analyzes the relationship between current renewable energy technology costs and cumulative production research development and demonstration expenditures and other institutional influences combining the theoretical framework of learning by doing and developments in learning by searching with the fields of organizational learning and institutional economics offers a complete methodological framework to examine the underlying capital cost trajectory when developing electricity cost estimates used in energy policy planning models sensitivities of the learning rates for global wind and solar photovoltaic technologies to changes in the model parameters are tested the implications of the results indicate that institutional policy instruments play an important role for these technologies to achieve cost reductions and further market adoption

corporate dollar debt and depreciations much ado about nothing abstract emerging markets firms often carry foreign currency debt on their balance sheets following a depreciation the expanding peso value of dollar liabilities could via a net worth effect offset the expansionary competitiveness effect to assess which effect dominates we use accounting data including the currency composition of liabilities for 450 nonfinancial firms in five latin american countries in the 1990s we find that firms holding more dollar debt do not invest less than their peso indebted counterparts following a depreciation we also show that these firms match the currency denomination of their liabilities with the exchange rate sensitivity of their profits

mexico s balance of payments crisis a chronicle of a death foretold this paper claims that the roots of mexico s balance of payments crisis are found in the prevailing high degree of capital mobility and financial globalization under these circumstances shifts in foreign capital flows and anticipation of a banking system bailout may produce large imbalances between stocks of financial assets and foreign reserves threatening the sustainability of currency pegs econometric analysis suggests that half of mexico s reserve losses could be accounted for by these phenomena large financial imbalances are also fertile ground for self fulfilling prophesy crises which lead devaluations to produce deep recessions these difficulties can be partly remedied by appropriate policies

mundell s trilemma policy trade offs within the middle ground abstract mundells s trilemma makes strong categorial predictions on monetary policy trade offs where a small economy either has to adopt floating exchange rates or a closed capital account to establish interest rate autonomy however the trilemma is silent about a functional description of respective trade offs for intermediate middle ground policies accounting for the entire space of such policies we study monetary autonomy in an unrestricted and continuous manner for 20 mostly developed economies evidence suggests that interest rate dependence almost linearly increases with the fx stability indicator under financial openness thereby full independence would require an intensity of fx volatility which policymakers might hardly accept however this strong trade off can be relaxed efficiently by a moderate reduction of financial openness hence such a policy might offer some protection against the global financial cycle and leaves a considerable scope to combine a domestic monetary policy with a reduced fx rate variability

real flexibility and financial structure an empirical analysis i examine the empirical relation between real flexibility and financial structure i test whether real flexibility increases debt capacity by lowering default risk and making assets more marketable or decreases debt capacity by facilitating risk shifting and asset substitution i measure real flexibility as the sensitivity of marginal production and investment decisions to variations in the economic environment i find that financial leverage is negatively related to production flexibility but positively related to investment flexibility this split in results suggests that although asset substitution facilitated by investment flexibility can be prevented contractually risk shifting facilitated by production flexibility is intractable copyright 2003 oxford university press

a counterfactual analysis of the argentinian monetary transformation in 2002 a hard peg restored economic stability in argentina during the nineties but made it also vulnerable to real shocks in so far as the economy was highly dollarized a devaluation in 1998 in brasil its main partner damaged the argentinian competitiveness and resulted in a fall in export demand there was a need for a real adjustment but removing the peg would have implied large balance sheet effects and raised serious financial issues this article endeavours to learn a lesson about the aftermath of hard peg regime from the argentinian experience it is based on a dynamic macroeconomic model to assess the impact of three scenarios already suggested in the literature two hypothetical a floating regime and dollarization and one which was actually implemented in 2002 the pesification of the whole economy the simulations suggest that pesification was the only scenario with unambiguous expansionary effects

debt and the marginal tax rate abstract do taxes affect corporate debt policy this paper tests whether the incremental use of debt is positively related to simulated firm specific marginal tax rates that account for net operating losses investment tax credits and the alternative minimum tax the simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code tax regime shifts business cycle effects and the progressive nature of the statutory tax schedule using annual data from more than 10 000 firms for the years 1980 1992 i provide evidence which indicates that high tax rate firms issue more debt than their low tax rate counterparts

on the debt capacity of growth options we relate the value of growth options in the firm s investment opportunity set to the level of debt in the firm s capital structure underinestment costs of debt increase and free cash flow benefits fall with additional growth options thus if debt capacity is defined as the amount of debt the firm optimally adds for an incremental project then the debt capacity of growth options is negative this result implies that book leverage should fall with the addition of growth options our tests using a large sample of industrial firms confirm this prediction

temporary stabilization predetermined exchange rates the paper analyzes the impact of a stabilization policy based on a temporary reduction in the rate of devaluation against a background in which a constant rate of devaluation has no real effects it is shown that the temporary policy does and furthermore that the real effects tend to become bigger in absolute value as the horizon of the temporary policy is shortened the central discussion is carried out in terms of a one good cash in advance model with perfect capital mobility and ramsey type consumers results are extended to account for home goods and variable velocity the roles of capital mobility and banking liberalization are briefly discussed

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

determinants and costs of current account reversals under heterogeneity and serial correlation using large panel data sets for analysis of determinants and costs of reversals asks for controls of latent heterogeneity among countries this article performs a bayesian analysis which allows for a parsimonious yet flexible handling of country specific heterogeneity via random coefficients and serially correlated errors consideration of persistence within the employed macroeconomic data is important to gauge the impact of explaining variables suggested by theory correctly bayesian specification tests provide evidence in favour of models incorporating heterogeneity and serial correlation the results suggest that costs of reversals are overestimated when country specific heterogeneity is neglected and stress the importance of external variables in explaining current account reversals results are checked for robustness against the underlying reversal definition

intertemporal budget policies and macroeconomic adjustment in a small open economy abstract this paper analyzes the role of nominal assets in ranking intertemporal budget policies in a growing open economy budget policies are ranked in terms of the public s intertemporal tax liability in our small open economy model the constraint for the valuation of private and public financial assets is in terms of the exogenous foreign price level we show that this limits under purchasing power parity the scope of the government to influence the real value of financial assets using fiscal and monetary policy instruments

dynamic recapitalization policies and the role of call premia and issue discounts in a dynamic framework the advantage of leverage depends upon the firm s recapitalization policy we show that if bonds are callable at par then equityholders have an incentive to recapitalize too early call premia and issue discounts however mitigate the agency problem of early recapitalization the model provides the optimal call premium and issue discount as a function of firm specific characteristics an analysis of a bond sample supports the model s prediction that the optimal call premium is positively related to firm risk

debt agency costs and industry equilibrium we show that risk characteristics of projects cash flows are endogenously determined by the investment decisions of all firms in an industry as a result in reasonable settings financial structures which create incentives to expropriate debtholders by increasing risk are shown not to reduce value in an industry equilibrium without taxes capital structure is irrelevant for individual firms despite its effect on the equityholders incentives but the maximum total amount of debt in the industry is determinate allowing for a corporate tax advantage of debt capital structure becomes relevant but firms are indifferent between distinct alternative debt levels the effect of firms financial structures on subsequent investment and output decisions has recently received considerable attention in the finance literature the central insight that equityholders control the firm s investment and production decisions and in general do not maximize the value of a levered firm has been applied to the analysis of risk shifting underinvestment and firms abilities to enter into optimal contracts with their customers existing models of firms financial structures and their effect on investment decisions are generally based on a single firm framework and do not take into account the relationship between project cash flows and the investment decisions of all firms in the industry 2 in this paper we allow the distribution of investment projects within an industry to adjust and show that this generates new insights and reverses several key results of single firm agency cost models the new predictions conform with well documented

rational contagion and the globalization of securities markets this paper argues that globalization may promote contagion by weakening incentives for gathering costly information and by strengthening incentives for imitating arbitrary market portfolios in the presence of short selling constraints the gain of gathering information at a fixed cost may diminish as markets grow moreover if a portfolio manager s marginal cost for yielding below market returns exceeds the marginal gain for above market returns there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows numerical simulations suggest that these frictions can have significant implications for capital flows in emerging markets

distinguished lecture on economics in government exchange rate regimes is the bipolar view correct the choice of appropriate exchange rate regime which for economies with access to international capital markets increasingly means a move away from the middle ground of pegged but adjustable fixed exchange rates towards the two corner regimes of either flexible exchange rates or a fixed exchange rate supported if necessary by a commitment to give up altogether an independent monetary policy lawrence h summers 2000 p 8

renewable energy policy and electricity market reforms in china the article examines the potential effectiveness of the renewable energy policy in china and its regulatory law framework it frames the option of renewable energy technology within the background of the long lasting electricity problems that china has faced including serious supply shortages reliance on coal and severe environmental contamination its dual administrative and ownership system based on state and privately owned industry is discussed together with the market reform measures adopted in the sector current renewable energy policy is analysed and the scope of the 2005 renewable energy promotion law is investigated this is conducted within the context of the electricity sector reform that china adopted and its effects upon the prospects of encouraging as well as expanding the development of renewable energy this study draws upon primary information collected from interviews with stakeholders on the policy adequacy and identifies three main types of shortcomings that have interfered with a more successful expansion of renewable energy in china

the transmission of disturbances under alternative exchange rate regimes with optimal indexing the paper develops a general stochastic macroeconomic model that can be used to study the international transmission of disturbances under four alternative exchange rate systems uniform flexible exchange rates uniform fixed exchange rates and two versions of two tier exchange rates the analysis makes two general points first one cannot assume stability of structure when assessing the consequences of alternative exchange rate regimes for example the slope of the aggregate supply curve and the rationally formed expectations in the asset markets can respond dramatically to the government s choice of exchange rate regime second exchange rate regimes that provide full insulation from foreign disturbances may nevertheless be inferior to other regimes in terms of their ability to maximize social welfare

the effect of taxes and depreciation on corporate investment and financial leverage this paper provides an analysis of the effect of corporate and personal taxes on the firm s optimal investment and financing decisions under uncertainty it extends the deangelo aad masulis capital structure model by endogenizing the firm s investment decision the authors results indicate that when investment is allowed to adjust optimally the existing predictions about the relationship between investment related and debt related tax shields must be modified in particular the authors show that increases in investment related tax shields due to changes in the corporate tax code are not necessarily associated with reductions in leverage at the individual firm level in cross sectional analysis firms with higher investment related tax shields normalized by expected earnings need not have lower debt related tax shields normalized by expected earnings unless all firms utilize the same production technology differences in production technologies across firms may thus explain why the empirical results of recent cross sectional studies have not conformed to the predictions of deangelo and masulis

on the flexibility of monetary policy the case of the optimal inflation tax this paper examines optimal monetary policy under uncertainty in a context in which policy makers are able to make credible policy commitments we study an optimal taxation problem of minimizing the social cost of financing a stochastic and exogenous level of government transfers since in the basic model the welfare costs of inflation derive only from expected inflation the optimal monetary policy is highly responsive to the state of nature in a benchmark case in which all shocks are transitory the optimal policy calls for loading all the variability of government transfers on the shoulders of the inflation tax

currency mismatches and monetary policy a tale of two equilibria we develop a model of a small economy whose residents choose whether to borrow in domestic or foreign currency the central bank in turn chooses fixed or flexible exchange rates taking the currency denomination of debts as given we characterize the simultaneous determination of portfolios and exchange rate regime both floating and fixed rates can occur as equilibrium outcomes fear of floating may emerge endogenously and in association with a currency mismatch in assets and liabilities if equilibria with both fixed rates and floating rates coexist the latter is pareto superior lessons for current de dollarization proposals are discussed

inflation targeting and exchange rate management in less developed countries abstract we analyze coordination of monetary and exchange rate policy in a two sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets our central finding is that tight management of the exchange rate greatly enhances the efficacy of inflation targeting in a flexible exchange rate system inflation targeting incurs a high risk of indeterminacy moreover small inflation shocks may escalate into much larger increases in inflation ex post both problems disappear when the central bank fixes the path of the nominal exchange rate or leans heavily against the wind in a managed float

what drives credit dollarization in transition economies abstract this paper provides an in depth analysis of the use of foreign currencies in the lending activities of banks in transition economies the impact of bank and firm variables on credit dollarization is studied in an optimal portfolio allocation model and estimated using new aggregate data for 21 transition economies for the period 1990 2003 empirical results provide evidence that credit dollarization is the combined outcome of domestic deposit dollarization and banks desire for currency matched portfolios beyond regulatory requirements the effects of international financial factors and natural hedges are less robust across alternative specifications the paper further discusses the role of regulations in affecting the impact of these factors on credit dollarization and calls for more developed domestic forward foreign exchange markets

fostering a renewable energy technology industry an international comparison of wind industry policy support mechanisms this article examines the importance of national and sub national policies in supporting the development of successful global wind turbine manufacturing companies we explore the motivations behind establishing a local wind power industry and the paths that different countries have taken to develop indigenous large wind turbine manufacturing industries within their borders this is done through a cross country comparison of the policy support mechanisms that have been employed to directly and indirectly promote wind technology manufacturing in 12 countries we find that in many instances there is a clear relationship between a manufacturer s success in its home country market and its eventual success in the global wind power market whether new wind turbine manufacturing entrants are able to succeed will likely depend in part on the utilization of their turbines in their own domestic market which in turn will be influenced by the annual size and stability of that market consequently policies that support a sizable stable market for wind power in conjunction with policies that specifically provide incentives for wind power technology to be manufactured locally are most likely to result in the establishment of an internationally competitive wind industry

the maturity structure of corporate debt we provide an empirical examination of the determinants of corporate debt maturity our evidence offers strong support for the contracting cost hypothesis firms that have few growth options are large or are regulated have more long term debt in their capital structure we find little evidence that firms use the maturity structure of their debt to signal information to the market the evidence is consistent however with the hypothesis that firms with larger information asymmetries issue more short term debt we find no evidence that taxes affect debt maturity

the mirage of exchange rate regimes for emerging market countries this paper argues that much of the debate on choosing an exchange rate regime misses the boat it begins by discussing the standard theory of choice between exchange rate regimes and then explores the weaknesses in this theory especially when it is applied to emerging market economies it then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits the conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal financial and monetary institutions in producing macroeconomic success in emerging market countries this suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable and more on these deeper institutional arrangements a focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years

market liquidity hedging and crashes in the absence of significant news hedging strategies were blamed for the stock market crash of october 1987 but traditional models cannot explain how a relatively small amount of selling could cause so large a price drop the authors develop a rational expectations model in which prices play an important role in shaping expectations markets are much less liquid in their model than in traditional models discontinuities or crashes can occur even with relatively little hedging the model is consistent with theories as disparate as keynes beauty contest insights and thom s catastrophe analysis and suggests means to reduce volatility copyright 1990 by american economic association

bankruptcy costs and the theory of oligopoly this paper examines the relationship between financial decisions and output decisions in oligopolistic markets assuming a duopoly market structure in which financial decisions and output decisions follow in sequence the authors analyze how bankrupt cy costs which are incurred when the firm is unable to meet current debt obligations affect the firm s behavior in output markets with fixed bankruptcy costs firms have an incentive to increase output le vels if they take on more debt proportional bankruptcy costs lead to a u shaped relationship between output and debt foresighted owners of firms are led to take into account the strategic output effects of financial structure when considering an optimal financial structure for the firm

how does industry affect firm financial structure we examine the importance of industry to firm level financial and real decisions we find that in addition to standard industry fixed effects financial structure also depends on a firm s position within its industry in competitive industries a firm s financial leverage depends on its natural hedge its proximity to the median industry capital labor ratio the actions of other firms in the industry and its status as entrant incumbent or exiting firm financial leverage is higher and less dispersed in concentrated industries where strategic debt interactions are also stronger but a firm s natural hedge is not significant our results show that financial structure technology and risk are jointly determined within industries these findings are consistent with recent industry equilibrium models of financial structure copyright 2005 oxford university press