When real estate agent effort is unobservable, home sellers do not prefer the lowest possible commission rate because such a rate does not induce sufficient effort from agents. As a result, the optimal commission from the seller’s perspective exhibits downward rigidity, even if there is free entry. The analysis shows that downward rigidity will occur if and only if the quasi-fixed costs of sell...

This paper presents a 3D model for pricing defaultable bonds with embedded call options. The pricing model incorporates three essential ingredients in the pricing of defaultable bonds: stochastic interest rate, stochastic default risk, and call provision. Both the stochastic interest rate and the stochastic default risk are modeled as a square-root diffusion process. The default risk process is...

This paper tests for uncovered interest parity (UIP) using daily data for 23 developing and developed countries during the crisis-strewn 1990s. We find that UIP works better on average in the 1990s than in previous eras in the sense that the slope coefficient from a regression of exchange rate changes on interest differentials yields a positive coefficient (which is sometimes insignificantly di...

In this paper, short-run and long-run relationships between real interest rates in G-7 countries are analyzed. Using the model that follows the dynamic simultaneous equation models of Pesaran (1997) and Hsiao (1997), we find evidences of long-run relationships between the US real interest rate and the other six G-7 countries. However, the estimated parameters do not support the real interest ra...

This paper studies bank loans over the business cycles in Iran to determine the role of Iranian banks in stabilizing credit. By estimating the long-run relations using dynamic OLS and fully modified OLS estimators, the findings show that real bank lending is positively related to real GDP in the long-run providing evidences of the pro-cyclicality of bank lending in Iran. Hence, Iranian banking ...