dynamic banking a reconsideration financially intermediated and stock market consumption investment allocations with and without governmental interventions are compared in a welfare sense in overlapping generation economies with and without shocks to agents intertemporal preferences we first show that in economies with preference shocks governmental interventions subject to the same information requirements as those imposed on financial intermediaries lead to stock market allocations that are not inferior to those attained under financial intermediation second we argue that the necessary interventions are qualitatively no different from those required to implement stationary optimal allocations in olg models without shocks to agents intertemporal consumption preferences

introduction to the symposium on growth fluctuations and sunspots confronting the data the papers in this symposium demonstrate the theoretical as well as the empirical plausibility of indeterminacy and of sunspots in equilibrium models with infinitely lived agents they depart from the standard competitive framework because of the presence of externalities or of monopolistic competition some focus on business fluctuations while others address long run growth the second part of the introduction presents a general unifying framework to identify the structure that is common to the papers of the symposium journal of economic literature classification numbers e00 e3 o40 c 1994 academic press inc

banking panics information and rational expectations equilibrium this paper shows that bank runs can be modeled as an equilibrium phenomenon we demonstrate that some aspects of the intuitive story that bank runs start with fears of insolvency of banks can be rigorously modeled if individuals observe long lines at the bank they correctly infer that there is a possibility that the bank is about to fail and precipitate a bank run however bank runs occur even when no one has any adverse information extra market constraints such as suspension of convertibility can prevent bank runs and result in superior allocations banking panics were a recurrent phenomenon in the united states until the 1930s they have re emerged as a source of public concern and much theoretical research recently in this paper we provide an information theoretic rationale for bank runs the traditional story is that contagion is an important aspect of bank runs the idea seems to be that when the general public observes large withdrawals from the banking system fears of insolvency grow resulting in even larger withdrawals of deposits in our model some individuals withdraw because they get information that future returns are likely to be low uninformed individuals observing this also have an incentive to liquidate their investments in addition some individuals need to withdraw deposits for other than informationally based reasons thus if the random realization of such a group of individuals is unusually large then the uninformed individuals will be misled and will precipitate a run on the bank the technology is such that a large volume of withdrawals involves liquidation costs consequently runs on the bank do impose social costs a mechanism that may reduce these costs in our model is to suspend convertibility if withdrawals are high however those individuals who need to withdraw their assets for liquidity reasons are worse off ex post our model provides a rationalization for restrictions in demand deposits that were widespread prior to 1929 friedman and schwartz 7 suggest that restrictions of payments ensured

why invest in wind energy career incentives and chinese renewable energy politics we study wind development at the provincial level in china modelling installed wind capacities as a function of both economics and politics we assume that the top provincial officials desire to maximize their chances of promotion under the chinese cadre evaluation system we expect that those with the strongest incentives to perform in order to achieve promotion would work harder to comply with the central government s policy agenda to promote renewable energy collecting and testing data on provincial leaders characteristics we find that provinces governed by party secretaries who were approaching the age of 65 are associated with significantly higher level of wind installed capacities this result supports the political tournaments theory of chinese politics we also find that better educated party secretaries are likely to be more supportive of renewable energy implying that education acts to encourage provincial leaders to support the central government s policy

good ipos draw in bad inelastic banking capacity and hot markets we posit that screening ipos requires specialized labor which is in fixed supply a sudden increase in demand for ipo financing increases the compensation of ipo screening labor this results in reduced screening encouraging sub marginal firms to enter the ipo market further fueling the demand for screening labor the model s conclusions are consistent with empirical findings of increased underpricing during hot markets positive correlation between issue volume and underpricing and with tipping points between hot and cold markets finally the model makes sharp predictions relating the ipo market to fundamental values of firms and to investment banking returns

the high cost of incompletely funding the fslic shortage of explicit capital a useful parallel can be drawn between the alaskan oil spill of 1989 and the flood of red ink spilled in recent years by u s thrift institutions savings and loan associations and savings banks in each case initial damage from the spill was severely compounded by delaying and mishandling the clean up required for more than a decade federal officials refused to acknowledge that the thrift ink spill had compromised the integrity of the supporting deposit insurance fund instead of promptly shoring up the finances of this fund officials used accounting smoke and mirrors to cover up the fund s secularly increasing capital shortage this prolonged refusal to face up to the magnitude of the underfunding imposed enormous costs on society as a whole

monopolistic competition endogenous markups and growth markup variations brought about by changing demand conditions can have a significant impact on the growth dynamics of imperfectly competitive economies they can generate multiple steady states as well as multiple equilibrium paths for given initial conditions we illustrate that result in the context of two alternative models in the first model equilibrium markups depend on the aggregate savings rate in the second model the markup level varies with the range of intermediate goods available we discuss some of the empirical implications of the class of models introduced in the paper

the informational content of initial public offerings the ability of capital markets to distinguish firms of different value by the size of their initial equity offerings is attenuated when insiders can sell equity more than once a model is developed in which there is price risk from holding equity between periods when the uncertainty is small there must be pooling in the first period when uncertainty is large the pooling equilibria dominate the separating equilibrium the size of an entrepreneur s initial public offering of equity can be informative this point was made in leland and pyle 1977 and stiglitz 1982 an entrepreneur with a good project can signal the value of the project by his or her willingness to retain equity an implicit assumption of this analysis is that the entrepreneur has only one opportunity to sell equity the assumption of a single sale is important since once the entrepreneur has signalled his or her project value by retaining equity investors should be willing to purchase the remaining equity however if entrepreneurs with bad projects foresee this they too may wish to retain equity initially and render themselves indistinguishable from entrepreneurs with good projects the current paper develops a model with two trading periods to capture the impact of having repeat sales of equity there is a public offering in the first period then the entrepreneur can make an open market sale in the second period however there is exogenous price risk which makes it costly for the entrepreneur to wait to sell in this context the value of the entrepreneur s project may not be revealed in the first period retaining equity is not very costly when uncertainty is small and there will only be pooling equilibria in this case in such a situation no information is revealed in the first period when the level of uncertainty is great there does exist a separating equilibrium however the pooling equilibria pareto dominate the separating equilibrium throughout the analysis the focus will be on paretooptimal equilibria the idea that an informed agent can profitably trade over time has been examined in related contexts kyle 1985 looked at the optimal trading strategy for an insider whose sequence of purchases is hidden in the aggregate order flow in equilibrium the insider s information is not completely incorporated into the market price until the close of trading

litigation risk and ipo underpricing abstract we examine the relation between risk and ipo underpricing and test two aspects of the litigation risk hypothesis 1 firms with higher litigation risk underprice their ipos by a greater amount as a form of insurance insurance effect and 2 higher underpricing lowers expected litigation costs deterrence effect to adjust for the endogeneity bias in previous studies we use a simultaneous equation framework evidence provides support for both aspects of the litigation risk hypothesis

bank liquidity and stability in an overlapping generations model in an infinitely repeated version of the diamond and dybvig 1983 model intergenerational transfers enable a bank to achieve interest rate smoothing and to provide depositors with liquidity insurance without diamond and dybvig s assumption of no side trades the bank is subject to runs that may result from either excessive withdrawals or the lack of new deposits the latter cause which cannot occur in diamond and dybvig s one generation model implies that suspension of convertibility may not prevent bank runs government intervention may be necessary to maintain bank stability article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

an expository note on individual risk without aggregate uncertainty abstract in economies where agents bear some risk the analysis would often be facilitated by the assumption that the risks are i i d and disappear in the aggregate a formal appeal to the law of large numbers requires the consideration of a sequence of finite economies in an economy with a continuum of agents there are countable families of sets for which it is impossible for a law of large numbers to be valid with countably many agents and a finitely additive measure independence is compatible with the law of large numbers

banking as the provision of liquidity this article represents a model economy in which demand deposits represent the optimal financial intermediation because these demand deposits are backed in part by an illiquid asset the in termediary bank is subject to panics in which each agent ration ally decides to withdraw his deposits making all worse off banks ca n prevent panics only through a distortion of the optimal contract t he government can prevent panics without this distortion by guarantee ing the return from deposits the moral hazard introduced by this dep osit insurance induces the government to regulate the intermediary s portfolio and returns copyright 1988 by the university of chicago

financial contagion and depositor monitoring this paper analyzes market discipline in a many bank economy where contagion and bank runs interact we present a model with differently informed depositors where those depositors that are more informed have incentives to monitor banks investments it is shown that when banks are undercapitalized and the probability of success of the risky asset is low depositors might prefer a contract that is subject to bank runs in the interim period to a contract that allows banks to gamble with their funds and maintain their investment the results of the paper emphasize the benefits of private monitoring of banks in order to promote market discipline

stationary sunspot equilibria in a finance constrained economy abstract stationary sunspot equilibria are shown to exist in a production economy with infinite lived agents when it is not possible to borrow against future wage income equilibrium fluctuations exhibit persistence over time scales of the same order of magnitude as observed business cycles an active fiscal policy that stabilizes aggregate money expenditures can prevent such fluctuations

uniqueness and indeterminacy on the dynamics of endogenous growth abstract in this paper we study the dynamics of endogenous growth both in the model of lucas and in a generalization that incorporates a labor leisure choice we characterize the regions of the parameter space that give rise to unique equilibria as well as the regions that yield a continuum of equilibria with positive growth rates we find that such multiple equilibria exist for empirically very plausible parameters in particular when the lucas model is modified to incorporate endogenous labor journal of economic literature numbers e00 e3 o40

seasonal darkness and ipo abstract this paper analyses the possible relationship between a particular natural phenomenon the shortening of light hours in autumn and a financial issue the level of underpricing recorded on the first day of listing by the companies subject to initial public offering ipo it analyses a sample of 3102 ipos in 32 countries in the period between january 1 2006 and december 31 2016 the empirical evidence supports the assumption that seasonal darkness when there is a lack of light has a positive impact on the raw initial returns of the ipos made during this period the results obtained confirm the previous studies aimed at investigating the phenomenon suggest a possible behavioral interpretation and in conclusion make a positive contribution deriving from the large sample size the consideration of different latitudes and the assumed perspective

the optimal spread and offering price for underwritten securities abstract the paper develops the net proceeds maximization theory explaining how the spread and offering price are determined in all underwritten offerings in the u s the theory yields solutions for the optimal spread and offering price for all underwritten securities and it yields comparative statics that explain the cross sectional variation in actual spreads and initial returns across different types of underwritten securities the theory also suggests two alternative explanations to the ones offered by chen and ritter j finance 55 2000 1105 for the clustering of unseasoned equity offerings spreads at 7

the welfare costs of self fulfilling bank runs we study the welfare implications of self fulfilling bank runs and liquidity require ments in a neoclassical growth model where banks facing long lasting possible runs can choose in any period a run proof asset portfolio in this framework runs distort banks insurance provision against idiosyncratic liquidity shocks and liquidity requirements re solve this distortion by forcing a credit tightening quantitatively the welfare costs of self fulfilling bank runs are equivalent to a constant consumption loss of up to 2 5 percent of u s gdp depending on fundamentals liquidity requirements might generate small welfare gains but also increase the welfare costs by up to 1 8 percent

what s different about banks abstract negotiable certificates of deposit cd s trade in the capital market in competition with other securities like commercial paper and bankers acceptances if cd s must pay lenders competitive monetary interest the reserve tax on cd s is borne by bank borrowers viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk moreover there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with cd s

distinguishing panics and information based bank runs welfare and policy implications in this paper we contrast panics and information based bank runs in an effort to provide a robust and empirically plausible model of how bank runs are triggered the model of information based runs is characterized by two sided asymmetric information the bank cannot observe the true liquidity needs of the depositors while depositors are asymmetrically informed about bank asset quality we also examine the relative degrees of risk sharing provided by bank deposit contracts and traded equity contracts we show that the choice of deposit or equity depends on the attributes of and information about the underlying investment returns

the term structure of investment and the banks insurance function abstract the article re examines the proposition first formulated rigorously by bryant a model of reserves bank runs and deposit insurance journal of banking and finance 4 335 344 1980 and diamond and dybvig bank runs deposit insurance and liquidity journal of political economy 91 401 419 1983 that in a production economy with stochastic liquidity shocks to the household sector banks serve to provide optimal intertemporal insurance to consumers the paper argues that in order to understand the moral hazard problems inherent in this insurance problem it is too narrow to consider solely the role of banks as providers of liquidity the paper develops a model with several investment opportunities in which banks have the additional function of asset diversification this pooling of intermediation functions is shown to reduce the moral hazard problem thereby enhancing the stability of depository contracts and increasing the scope of the banks insurance function

comparing the climate policy performance of emerging economies summary domestic climate policies and the actual environmental performance differ between emerging economies using a fuzzy set qualitative comparative analysis qca this paper tests the influence of the domestic green industry the ratio of fossil fuels to financial power the international negotiating position and the environmental civil society in brazil china india indonesia south korea mexico and south africa a bad ratio of domestic fossil fuel production to financial power and a weak environmental civil society are a sufficient condition for weak climate policy performance a weak domestic green industry combined with a weak influence of the negotiations only explains some of the cases

bank runs as an equilibrium phenomenon a standard demand deposit contract in which individuals are entitled to their full deposit at any time provided the bank is solvent is analyzed in a context in which there are no exogenous events on which agents condition their behavior and a unique equilibrium involving a bank run with positive probability is shown to exist

balanced budget rules distortionary taxes and aggregate instability a traditional argument against a balanced budget fiscal policy rule is that it amplifies business cycles by stimulating aggregate demand during booms via tax cuts and higher public expenditures and by reducing demand during recessions through a corresponding fiscal contraction this paper suggests an additional source of instability that may arise from this type of fiscal policy rule it shows that within the standard neoclassical growth model a balanced budget rule can make expectations of higher tax rates self fulfilling if the fiscal authority relies heavily on changes in labor income taxes to eliminate short run fiscal imbalances calibrated versions of the model show that indeterminacy occurs for income tax rates that are empirically plausible for the u s economy and other group of seven countries

signalling and the pricing of new issues this paper develops a signalling model with two signals two attributes and a continuum of signal levels and attribute types to explain new issue underpricing both the fraction of the new issue retained by the issuer and its offering price convey to investors the unobservable intrinsic value of the firm and the variance of its cash flows many of the model s comparative statics results are novel empirically testable and consistent with the existing empirical evidence on new issues in particular the degree of underpricing which can be inferred from observable variables is positively related to the firm s post issue share price

stabilizing competitive business cycles abstract we study how stylized monetary proportional money transfers fiscal lump sum money transfers and public expenditure policies may eliminate endogenous deterministic cycles and stationary markov sunspot equilibria in a simple version of the overlapping generations model we also present new constructive methods for analyzing stationary markov sunspot equilibria in such a framework

monetary policy under alternative bank market structures abstract the purpose of this paper is to derive and compare the short run effects of monetary policy under both perfectly and imperfectly competitive banking markets within the context of a general equilibrium framework which emphasizes the demands for and supplies of financial assets it is demonstrated that the structure of banking markets can have a bearing on the appropriate choice of policy targets and instruments specifically the federal funds rate is shown to be a potentially ineffective target instrument for policy under a competitive banking system although it can be used to produce conventional short run effects when banking markets are imperfect in contrast the level of currency and unborrowed reserves can be utilized as an effective target instrument under either form of bank market structure

the pricing of initial public offerings a dynamic model with information production this paper presents an information theoretic model of ipo pricing in which insiders sell stock in both the ipo and the secondary market have private information about their firm s prospects and outsiders may engage in costly information production about the firm high value firms knowing they are going to pool with low value firms induce outsiders to engage in information production by underpricing which compensates outsiders for the cost of producing information the information is reflected in the secondary market price of equity giving a higher expected stock price for high value firms

chaos sunspots and automatic stabilizers abstract we consider a real business cycle model with an externality in production depending on parameter values the model has sunspot equilibria cyclical and chaotic equilibria and equilibria with deterministic or stochastic regime switching we study the implications of this model environment for automatic stabilizer tax systems stabilization is desirable because the efficient allocations are characterized by constant employment and output growth we identify an automatic stabilizer income tax subsidy schedule with two properties i it specifies the tax rate to be an increasing function of aggregate employment and ii earnings are subsidized when aggregate employment is at its efficient level the first feature eliminates inefficient fluctuating equilibria while the second induces agents to internalize the externality

on endogenous competitive business cycles the belief that the long run equilibrium of a competitive monetary economy that does not experience any exogeneous shocks whether originating from the external environment or from policy should be modelled as a state that is stationary or perhaps growing at a constant rate seems to be deeply rooted in the mind of some economists

bank collapse and depression the recurrent banking panics of the 19th century and the great depression of the 1930s are widely viewed as failures of our economic system a simple version of samuelson s overlapping generations model is used to generate such failures of walrasian equilibrium the spontaneous panics generated involve a collapse of bank credit causing in turn a drop in investment demand the model suggests that both the recent technological advances in the intermediation industry and the current move towards deregulation of that industry are ominous developments

capital markets financial intermediaries and liquidity supply abstract we study a dynamic economy endowed with a sequence of overlapping generations of consumers and production processes and where productive assets are illiquid and consumption preferences are subject to uninsurable demand for liquidity we characterize the steady states that can be achieved with alternative financial systems we show that infinitely lived financial intermediaries offering a liability with age dependent restrictions may implement a social optimum with full insurance if instead they offer anonymous unrestricted contracts then only second best consumption allocations with partial insurance obtain we also examine the consumption allocations available when agents can trade shares in competitive stock markets while allowing for trade across generations may or may not improve upon generational autarky we show that this competitive equilibrium is not a social optimum and is dominated by a system of infinitely lived unrestricted intermediaries

active intermediation in a monetary overlapping generations economy abstract this paper establishes that the profit seeking activities of private intermediaries can ensure pareto efficiency in the standard pure exchange monetary overlapping generations economy without the need for government monetary or fiscal policy intervention moreover these profit seeking activities are shown to rule out all aperiodic and k periodic cycles for k greater than 2 contrary to much recent work on intermediation the profit opportunities that arise for intermediaries in this context are not due to assumed frictions or asymmetric information rather they are due to the dynamic open ended structure of the economy which permits debt roll over

anatomy of initial public offerings of common stock initial public offerings of common stocks ipos are typically underpriced in this paper the author develops and tests the hypothesis that underpricing serves as a form of insurance against legal liability and the associated damages to the reputations of investment bankers the empirical results based on samples of ipos that were brought to the market before and after the securities act of 1933 provide considerable support for the implicit insurance hypothesis specifically gross underpricing and market segmentation between prestigious and fringe investment bankers in originating unseasoned new issues appear to be peculiar to the post 1933 era a number of studies have documented that unseasoned common stocks typically garner large positive abnormal returns during a short period following the initial offering in his recent review of the empirical evidence on the initial returns of common stock offerings smith 36 concluded that the returns from offer price to after market price have exceeded fifteen percent his calculations did not include some of the earlier results obtained by mcdonald and fisher 23 and logue 20 when their samples are combined with those in smith s review the initial returns of unseasoned equity offerings appear even larger over seventeen percent these results imply that underwriters consistently offer the securities at substantial discounts from their values that are set in the after market in other words initial public offerings ipos appear to be underpriced what is even more puzzling is the fact that in some time periods underpricing appears to be systematically larger than in other periods ibbotson and jaffe 15 and ritter 29 have documented that during the postwar era there have been a number of periods in which the initial returns of common stocks have been extremely high ritter for example reported that the average return from the offer price to the first after market price was over forty eight percent for ipos in 1980 and 1981 1 similarly the initial returns of unseasoned issues of common stock brought to the market in 1950 1951 1961 and 1968 were unusually large these periods in which ipos were grossly underpriced are referred to as the hotissue markets why do investment bankers underprice ipos why do issuers

overlapping generations intermediation and the first welfare theorem abstract the first welfare theorem fails to hold for standard pure exchange overlapping generations economies because no agent exploits the profit opportunities which can arise from mediating intertemporal trade this paper modifies the standard economy by introducing an optimizing corporate intermediary which distributes net earnings back to consumer shareholders the pareto inefficient no trade state which is a stationary equilibrium for the standard economy cannot be an equilibrium for this modified brokerage economy because the intermediary perceives unbounded earnings opportunities if the intermediary seeks to maximize the minimum dividend per share distributed over time then there is a unique pareto efficient stationary equilibrium for the brokerage economy

multiple equilibria in dynamic rational expectations models a critical review abstract multiple equilibria are a ubiquitous feature of dynamic rational expectations models researchers have been divided on the implications of this phenomenon some have viewed this as a reflection of reality and a possible explanation of a wide range of economic phenomena others have suggested various selection criteria for choosing one among the many equilibria this paper reviews the major selection criteria that have been proposed and through application to three well known models shows under what circumstances one might expect them to choose the same or different equilibria in addition this paper proposes a new criteria based on the limit of finite horizon equilibria and investigates its relation to the other criteria

preplay communication participation restrictions and efficiency in initial public offerings the extent to which the observed procedures for selling new issues are efficient is studied we show that a posted price mechanism in conjunction with nonbinding preplay communication and participation restrictions leads to an allocation of the security and payment that maximizes the seller s expected revenue given the informational constraints imposed by the optimizing incentives of the potential buyers article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

signalling by underpricing in the ipo market abstract empirical evidence suggests the existence of hot issue markets for initial public offerings in certain periods and in certain industries new issues are underpriced and rationing occurs this paper develops a model consistent with this observation which assumes the firm itself best knows its prospects in certain circumstances firms with the most favorable prospects find it optimal to signal their type by underpricing their initial issue of shares and investors know that only the best can recoup the cost of this signal from subsequent issues

framing energy efficiency and renewable energy policies an international comparison between mexico and china abstract this essay compares national strategies on mitigation of ghg emissions for mexico and china this state centered analysis stresses the importance of the interaction between international commitments the disposition of internal interest of economy wide actors and the legacies of policy making and institutions particularly in relation to economic development and central local government relations this research does not attempt to classify institutions according to their effectives to foster climate change policies but rather explores specific circumstances for climate change policy making on developing countries contrary to international proposal to find a generic optimal policy choice the research explored the relevance of certain political and economic institutions that can be present in other national cases it shows that the legacies on liberalization and state retreat undermine the state ability to effectively engage with the economic actors on decisions and management likewise regular engagement with them undermines the state affinity towards pursuing economic efficient solutions the relevance of adequate system of incentives for local government to engage in an agenda that is by nature adopted by the central government

financial system design and liquidity provision by banks and markets in a dynamic economy this paper contributes to the literature on financial system design by comparing markets and banks in a dynamic economy investors trade off their liquidity needs against the high returns on illiquid investments both the banking system and the market can provide partial liquidity insurance to investors we consider full market participation as well as limited market participation we demonstrate that the full participation market with intergenerational trading can provide more liquidity than one without insurance is provided through wealth transfer across generations instead of cross subsidization across contemporaneous types as is the case in the finite economy given a full participation market that allows trading across generations only banks with initial capital can provide additional liquidity in a limited participation market with uncertainty about trading types an intergenerational bank with or without initial capital provides additional insurance to investors the need for trade is eliminated finally if there is no uncertainty about trading types then an intergenerational bank with initial capital eliminates the need for trading and improves welfare for all an intergenerational bank without initial capital improves welfare for people who do not trade

financial structure and aggregate economic activity an overview this paper surveys literature that explores the possible links between the financial system and aggregate economic behavior the survey is in two parts the first reviews the traditional work and the second discusses new research copyright 1988 by ohio state university press

do differences in institutional and legal environments explain cross country variations in ipo underpricing we empirically analyse the determinants of initial public offering ipo underpricing using panel data for 24 countries over the period 1988 2005 our hypotheses stress the importance of institutional and legal factors in explaining cross country variations we find evidence that underpricing is higher in countries with stronger protection of outside investors suggesting that incumbent managers try to use underpricing as a tool to safeguard their private benefits of control when going public moreover the results show that underpricing is reduced when stronger law enforcement and the availability of accounting information reduce the value of private benefits of control

financial markets intermediaries and intertemporal smoothing in an overlapping generations economy with incomplete financial markets but no intermediaries there is underinvestment in safe assets in an economy with intermediaries and no financial markets accumulating reserves of safe assets allows returns to be smoothed nondiversifiable risk to be eliminated and an ex ante pareto improvement compared to the allocation in the market equilibrium to be achieved in a mixed financial system however competition from financial markets constrains intermediaries so that they perform no better than markets alone

a simple test of baron s model of ipo underpricing abstract this paper tests baron s 1982 model of initial public offering ipo underpricing that model relies on information asymmetries between issuers and underwriters and predicts that offer prices will be lower than would prevail in the absence of asymmetric information we examine the initial public offerings of 38 investment banks that went public in the period 1970 1987 and participated in the distribution of their own securities we find that contrary to the implication of baron s model such self marketed offerings are characterized by statistically significant underpricing comparable to that of other ipos

financial intermediation in an overlapping generations model with transaction costs abstract we analyze an overlapping generations economy where agents interact to share liquidity risk we show that a pure exchange economy has excessive trade in equilibrium because agents interact to rebalance their portfolios intergenerational financial intermediaries reduce the number of interactions because agents only transact when they face liquidity needs in the absence of asset risk intermediaries match redemptions with deposits and dividends and never sell assets if the economy is subject to transaction costs the intermediated economy can sustain higher stationary investment and welfare we also find that dead weight transaction costs can increase welfare because it protects banks from interbank arbitrage and dampens the inherent cyclicality of market economies

initial public offering discount and competition abstract lacking examples of initial public offering ipo mechanisms that are open to the public and priced competitively previous studies could not determine what size discount if any is economically efficient we compare two pricing regimes on the tel aviv stock exchange an investor driven dutch auction limited by a binding maximum price replaced by one that is free of that constraint our evidence shows that rationing and herding disappear improving the access of uninformed investors to strong issues and alleviating their exposure to losses attached to weak issues pricing quality increases by the elimination of the underpricing bias decreased price dispersion and increased price sensitivity to ipo unique factors underwriter services do not deteriorate but garner moderately higher fees apparently to compensate for a higher risk consistently there is no deterioration in ipo efficiency as a screen from weak issues our evidence does not support the view that underpricing is competitive or eff

a review of optimal energy policy instruments on industrial energy efficiency programs rebound effects and government policies abstract industrial energy efficiency programs ieeps are defined as one of the most popular government policies that aim to reduce energy consumption in industrial energy intensive sectors in this paper we review and classify the most important academic studies that have addressed the environmental and economic aspects of ieeps using a systematic review the classification of energy policy instruments has been developed based on an analytical approach we discuss also the outputs benefits and barriers of ieeps besides a comprehensive argument about the restrictive policies on the rebound effects made after the implementation of these programs the results disclose that china usa and sweden are the most addressed countries on ieeps and their applications in this regard incentive energy policies e g voluntary agreements and subsidies have been applied more than others in the last decade furthermore most of the reviewed studies emphasize energy price reform as an effective practical policy while a few analytical methods can be seen to help policy makers determine the optimal levels of decision variables finally according to the state of the art analysis the authors provide some novel recommendations to improve the performance of ieeps using some restrictive policies on the negative impacts of rebound effects

a model of the demand for investment banking advising and distribution services for new issues this paper presents a theory of the demand for investment banking advising and distribution services for the case in which the investment banker is better informed about the capital market than is the issuer and the issuer cannot observe the distribution effort expended by the banker the optimal contract under which the offer price decision is delegated to the better informed banker in order to deal with the adverse selection and moral hazard problems resulting from the informational asymmetry and the observability problem is characterized the model demonstrates a positive demand for investment banking advising and distribution services and provides an explanation of the underpricing of new issues an investment banker performs three functions which may be of value to an issuer of new securities underwriting advising and distribution this paper presents a theory of the demand for investment banking advising and distribution services based on an informational asymmetry between an issuer of new securities and an investment banker ultimately a theory of the organization of the financial intermediary industry is required that would predict which firms would use which types of financial intermediaries for which purposes and which firms would raise capital without engaging the services of a financial intermediary only a limited set of such predictions are developed here in the context of a model of a fixedprice offering under a negotiated contract in which the investment banker is

banking and insurance abstract this paper studies the economic role of financial institutions in economies where agents incomes are subject to privately observable idiosyncratic random events the information structure precludes conventional insurance arrangements however a financial institution perhaps best viewed as a savings bank can provide partial insurance by generating a time pattern of deposit returns that redistributes wealth from agents with high incomes to those with low incomes resulting in a level of expected utility higher than that achievable in simple security markets insurance is incomplete because the bank faces a tradeoff between provision of insurance and maintenance of private incentives

optimal capacity in the banking sector and economic growth the paper investigates from the welfare and growth point of view the determination of the optimal capacity of the banking system for that purpose we consider an overlapping generation model with endogenous growth there is horizontal differentiation and imperfect competition in the banking sector macroeconomic shocks affect the return on capital and together with the expectations of depositors condition the stability of the banking sector we specify to what extent deposit insurance may reduce instability and increase the number of deposits welfare and growth we also characterize the conditions under which excess banking capacities may appear and how their reduction may improve welfare

litigation risk intermediation and the underpricing of initial public offerings we formally examine the role of litigation risk in initial public offering ipo pricing the underwriter s pricing decision trades off current revenue against expected future litigation costs both of which are increasing in the ipo price given a time consistency constraint and rational expectations on the part of investors however the standard litigation risk argument does not lead to equilibrium underpricing we develop a richer model that provides sufficient conditions under which there is equilibrium underpricing the issuer s choice of employing an underwriter versus floating the ipo on its own is examined and various testable implications of the model are developed article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

banking recession depression and government expenditure we examine public good expenditure given a stylized business cycle this cycle exhibits three characteristics a a full employment path b occasional drops from that path followed by reconvergence and c sustained underemployment following a large drop a banking system modeled using samuelson s overlapping generations approach propagates shocks two sources of shocks are treated anticipated future shocks to technology and inherent instability of the banking system both of which precipitate shocks to demand we conclude that under gross substitutes the government acting as competitive purchasing agent follows countercyclical policy

the costs of going public abstract this paper presents evidence regarding the two quantifiable components of the costs of going public direct expenses and underpricing together these costs average 21 22 of the realized market value of the securities issued for firm commitment offers and 31 87 for best efforts offers for a given size offer the direct expenses are of the same order of magnitude for both contract types but the underpricing is greater for best efforts offers an explanation of why some firms choose to use best efforts offers in spite of their apparent higher total costs is given

equity issue specific versus broad regulatory protections against expropriation risk international evidence from seos abstract we compare non issue specific broad investor protections against expropriation by firm s insiders with regulations that specifically protect investors of new equity issues issue specific since in nation regulations rarely change and are homogenous for all firms it is difficult to compare issue and non issue specific investor protection mechanisms in country specific studies we utilize cross country differences in regulations to study the relative importance of issue specific and broad regulatory protections using data on seasoned equity offerings seo we find that seo underpricing is related to broad protections in particular seo underpricing is negatively positively related with the strength of ex post ex ante anti self dealing laws independent of broad protections seo underpricing is unaffected by issue specific investor protections that is neither by disclosure requirements imposed on equity issuers nor by equity issue specific liability rights conferred on investors interactions between broad protections and issue specific protections indicate issue specific protections reduce seo underpricing only in countries with strong broad protections

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

liquidity creation through banks and markets multiple insurance and limited market access abstract the paper studies the intertemporal allocation of funds through demand deposits and anonymous markets first separately and then in an integrated model it reviews some work on the role of market frictions and asset characteristics and suggests that the interplay between these two is crucial in explaining the observed coexistence of demand deposits and anonymous markets

dynamic externalities multiple equilibria and growth abstract i consider an olg model with production and a single commodity i show that in such an environment unbounded growth of income per capita is not possible if the aggregate technology is of the constant returns to scale type i introduce an external effect in the aggregate production function and derive conditions under which persistent growth is an equilibrium outcome the introduction of an external effect also creates poverty traps and open sets of initial conditions for which there exists an infinite multiplicity of equilibria when such a multiplicity exists equilibria with the same initial position will display different asymptotic behaviors finally i show that by introducing appropriate tax schemes a unique equilibrium path can be selected

the fragility of short term secured funding markets abstract this paper develops an infinite horizon model of financial institutions that borrow short term and invest in long term assets that can be traded in frictionless markets because these financial intermediaries perform maturity transformation they are subject to potential runs we derive distinct liquidity collateral and asset liquidation constraints which determine whether a run can occur as a result of changing market expectations we show that the extent to which borrowers can ward off an individual run depends on whether it has sufficient liquidity collateral and asset liquidation capacity these determinants depend on the borrower s endogenous balance sheet and on exogenous fundamentals systemic runs are possible if shocks to the valuation of collateral held by outside investors are sufficiently strong and uniform and if the system as a whole is exposed to high short term funding risk the theory has policy implications for prudential regulation and lender of last resort interventions

real business cycles and the animal spirits hypothesis abstract we calibrate a quantitative equilibrium macroeconomic model with an aggregate technology that is subject to increasing returns and show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy these fluctuations are due to the self fulfilling beliefs of investors which we call animal spirits we compare the impulse response functions predicted by our model and by two other more standard models with a four variable vector autoregression on u s data our animal spirits economy is the most successful of the three at matching broad features of the dynamic responses in the data journal of economic literature classification numbers e00 e3 e32