Debt,Taxes, and Banks

Understanding the impact on banks’ capital structures of tax biases toward debt finance is critical to assessing policy responses to socially excessive bank leverage—but there is no empirical evidence of its extent. Guided by some simple theory, this paper explores this impact for a large panel of banks in 82 countries. On average, the tax sensitivity of banks’ leverage proves significant and about as large as for nonfinancial firms. Somewhat counterintuitively, but as the theory suggests, taxation has little impact on the use of hybrids. Banks holding smaller equity buffers and larger banks are noticeably less sensitive to tax.     

Employment and Welfare Effects of a Two-Tier Unemployment Compensation System

In Germany, as in many OECD countries, such as the United Kingdom, unemployment compensation consists of unemployment insurance and unemployment assistance. Unemployment assistance is provided subsequent to the expiration of entitlement to unemployment insurance and is lower. The effects of this two-tier unemployment compensation system are studied in a general equilibrium job search model with endogenous distributions of income, wealth, and employment which is calibrated with regard to the characteristics of the German economy. Our results are as follows: (i) employment is a decreasing function of both unemployment insurance and unemployment assistance. (ii) Aggregate savings are (not) a monotone decreasing function of unemployment assistance (unemployment insurance) payments. (iii) Optimal unemployment compensation payments are found to be a decreasing function over time.     

我国地方政府债务问题研究

地方政府债务是当前我国宏观经济运行中的一个突出问题,也是理论及实践方面所关注的焦点问题。本文首先分析了我国地方政府债务形成的主要原因以及对经济、社会造成的影响;其次,在与美国和日本地方政府债务管理模式比较的基础上,就目前我国地方政府债务管理中存在的问题提出了相关建议。     

Austerity and Private Debt

This study provides empirical evidence that the costs of austerity crucially depend on the level of private indebtedness. In particular, fiscal consolidations lead to severe contractions when implemented in high private‐debt states. Contrary, fiscal consolidations have no significant effect on economic activity when private debt is low. These results are robust to alternative definitions of private‐debt overhang, the composition of fiscal consolidations, and controlling for the state of the business cycle and government debt overhang. I show that deterioration in household balance sheets is important to understand private debt‐dependent effects of austerity.     

The Determinants of Debt Maturity at Issuance: A System-Based Model

We examine the determinants of corporate debt maturity while taking into account the interdependent relation between maturity and leverage. We do this by estimating a simultaneous-equations model on debt maturity and leverage for a sample of bond-issuing firms. To compare with previous studies, we also estimate a single-equation model on debt maturity using OLS. We define debt maturity as either the maturity of bonds at issuance (incremental approach), or the percentage of a firm's total debt that matures in more than three years (balance-sheet approach). Corroborating the findings of many previous studies, our single-equation OLS results support the underinvestment hypothesis purporting that firms with greater growth opportunities have shorter-term debt. However, under the simultaneous-equations model, the negative relation between a firm's debt maturity and its growth opportunities ceases to hold. Instead, it is the leverage decision that is influenced by growth opportunities. This suggests that existing models may overestimate the effect of growth opportunities on debt maturity.     

Value Under Active and Passive Debt Management Policy

The relationship between debt policy and valuation has been extensively analysed in the finance literature; within a Modigliani-Miller framework, the consensus is that valuation is affected by whether debt is managed actively or passively, and that for finite projects with time varying risky cash flows, it is appropriate to use a weighted average discount rate for valuation only if it is assumed that debt is actively managed. In this paper, the relationship between debt policy and valuation is re-examined. In particular, it is shown that, under one of the most plausible forms of passive debt policy, valuation using a simple weighted average discount rate is in fact possible.     

Debt,Diversification, and Valuation

The separate associations between financial leverage and valuation and between diversification and valuation have been widely researched. The joint function of leverage, diversification, and valuation, however, has received much less attention. Previous research shows that compared to specialized firms, diversified firms tend to have higher free cash flows and fewer high net present value investment opportunities. Consequently, the agency costs associated with potential overinvestment are greater for diversified firms. The literature also proposes that financial leverage should reduce agency costs. Consequently, we expect that the values of diversified firms increase with leverage. Our tests provide strong support for the hypothesis that the values of diversified firms increase with leverage. This tendency is not observed for specialized firms.JEL Classification:     

A CGE Analysis of the Impacts of a Carbon Tax on Provincial Economy in China

This article conducts a computable general equilibrium (CGE) model to investigate the impacts of a carbon tax on economy at province levels in China since China features significantly differentiated development modes across regions. Three representative provinces including Henan, Fujian, and Chongqing are selected as the sample. The empirical results indicate that carbon tax is an efficient policy to reduce carbon emissions accompanied with negative impact on provincial economy. To cushion the negative impacts of carbon tax, a moderate carbon tax rate and carbon tax recycling policy are recommended according to the simulation results.     

Financial fairness and conditional indexation

Collective pension contracts can generate advantages for their participants by implementing forms of risk sharing. To ensure the continuity of a collective scheme, it has to be monitored whether the contracts offered to participants are financially fair in terms of their market value. When risk sharing is implemented by means of optionalities such as conditional indexation, the analysis of financial fairness is not straightforward. In this paper, we use a stylised overlapping generations model to study financial fairness for a conditional indexation scheme. We find that financial fairness for all participants at all times is not feasible within a scheme of this type, unless the nature of indexation is such that the scheme is reduced to DC. However, financial fairness for incoming generations at the moment of entry can be realised. We show how to compute the fair contribution rate as a function of the current nominal asset/liability ratio for a given level of nominal entitlements. At low levels of the ratio, the fair contribution for incoming generations is also relatively low; nevertheless, the joining of a new generation still has a positive effect on the asset/liability ratio.