This paper investigates the ampli cation mechanism of the nancial accelerator on the equity premium in a production economy. To accomplish this, I incorporate the Gertler and Karadi (2011) type nancial accelerator into a medium-scale New Keynesian model with generalized recursive preferences. I nd that the nancial accelerator is a very plausible and new ampli cation mechanism for risk premia in...

This study shows that individual investors prefer to invest in high dividend yield stocks and in dividendpaying firms whereas relatively lower-taxed institutional investors tend to prefer low dividend yield stocks and non-paying firms. Consistent with Brennan and Thakor’s [Brennan, M. J., & A. V. Thakor. (1990). Shareholder preferences and dividend policy. Journal of Finance, 45, 993–1018] adve...

We analyze the problem of real optimal asset allocation for a pension fund maximising the expected CRRA utility of its real disposable wealth. The financial horizon of the analysis coincides with the random death time of a representative subscriber. We consider a very general setting where there exists a stochastic investment opportunity set together with stochastic contributions and pensions a...

Effects of dividend policy on corporate financial growth, is a major concern of most entities. Whether dividends have an influence on the value of the firm, is an important question in dividend policy. This study aimed at investigating the effects of dividend policy on financial growth of media firms. The study was conducted in Nairobi at The Nation media Group Headquarters. Respondents were se...

Credit default swaps (CDSs) are thought to ease borrowing by protecting lenders against default. This paper develops a model of the demand for CDS when borrowers choose the riskiness of investment and verification is imperfect. The model shows that CDSs may lead to risk-shifting, increasing the probability of default. Our model provides new insights on the role of CDS during the recent financia...

We show theoretically and empirically how real and financial frictions amplify the impact of uncertainty shocks on firms’investment, employment, debt (term structure of debt growth), and cash holding. We start by building a model with real and financial frictions, alongside uncertainty shocks, and show how adding financial frictions to the model almost doubles the negative impact of uncertainty...

Previous work in monetary policy futures markets under a single policy goal have shown this approach to be effective at eliminating the circularity problem inherent with private-sector targeting strategies. We extend this monetary policy setting framework to a typical multiple goal policy objective: inflation and output stabilization. We also demonstrate how the prices in policy futures markets...

This paper analyses how different types of access regulation to next generation networks affect investments and consumer welfare. The model consists of an investment stage with uncertain returns and subsequent quantity competition. The access price is a function of investment costs and the regulatory regime. A regime with fully distributed costs or regulatory holiday induces highest investments...

Recent studies on the so-called double dividend hypothesis find that environmental tax swaps exacerbate the costs of the tax system and therefore do not produce a double dividend. We extend these models by incorporating a fixed-factor in the production of the polluting good and, therefore, allowing Ricardian rents to be generated in the economy. In this setting, an environmental tax reform with...

Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies state-dependent effects of monetary policy on crisis risk. Based near-universe advanced economy cycles since nineteenth century, we show that discretionary policies during credit and asset price are more likely to trigger crises than prevent them. (JEL E4...