SIMULTANEOUS DEBT AND EQUITY ISSUES AND CAPITAL STRUCTURE TARGETS

Numerous empirical studies find evidence that managers behave as if they pursue target debt ratios. A possible alternative to the use of conventional, separate issuances of debt and equity to effect desired adjustments toward a target ratio is the simultaneous issuance of such securities. We extend prior research on such issues by exploring their use in the pursuit of capital structure targets. We find that the issuance of securities in general and the use of simultaneous issues of debt and equity in particular are at least partially influenced by where a firm's capital structure is relative to the average position in its industry. Further, shareholders' reactions to the announced plan to issue and to the issuance of securities are influenced, in part, by whether the issue moves the firm toward or away from the average capital structure in the industry. We also find evidence that the infrequent use of simultaneous issues relative to unaccompanied debt and equity issues is explained by their comparative flotation costs.     

A dynamic equilibrium model of search, production, and exchange

We study a general equilibrium model where agents search for production and trading opportunities, that generalizes the existing literature by considering a large number of differentiated commodities and agents with idiosyncratic tastes. Thus, agents must choose nontrivial exchange as well as production strategies. We consider decreasing, constant, and increasing returns to scale in the matching technology, and characterize the circumstances under which there exist multiple steady state equilibria, or multiple dynamic equilibria for given initial conditions. We also characterize the existence of dynamic equilibria that are limit cycles. Equilibria are not generally optimal, and when multiple equilibria coexist they may be ranked. We analyze comparative statics and find that certain intuitive results do not necessarily hold without restrictions on the stochastic structure.     

Some evidence on the influence of income uncertainty on aggregate consumption

Recent theory suggests uncertainty in income influences consumption expenditures. With disposable income modeled as a random walk plus drift, an econometric technique for estimating the moments of a dependent variable is used to test this hypothesis by producing a series of consistent estimates of the variance of disposable income. Using quarterly post-World War II data and a well-known specification of the consumption function, the standard deviation of income has a negative and statistically significant influence on consumption. The influence of the standard deviation of income on consumption is of the same order of magnitude as that of contemporaneous wealth on consumption.     

Opportunities for Commercial Hemp Production

Hemp production has been nonexistent in the United States since the 1950s. However, low prices for traditional crops have peeked interest in commercial hemp production. The current literature on hemp suggests that it may compete on the margin with traditional crops, but is not likely to generate sizeable profits. Hemp appears slightly more profitable than traditional row crops, but less profitable than other specialty crops. An important constraint to a viable commercial hemp industry is the current state of harvesting and processing technologies, which are quite labor intensive, and result in relatively high per unit costs.     

International Process Standards and North–South Trade

This paper examines the choice between alternative trade-based approaches to reducing global environmental damage, such as trade-related process standards and tariff-based approaches. Estimates of the effects of alternative policies are presented, using a calibrated global trade model with pollution externalities. It is found that both trade-related process standards and tariff-based policies are rather ineffective at reducing global emissions. The adoption of general process standards, however, might be exceedingly costly to developing countries.