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This note analyzes export production in the presence of exchange rate uncertainty under mean-variance preferences. We present the elasticity of risk aversion, since this elasticity concept permits a distinct investigation of risk and expectation effects on exports. Counterintutitive results are possible, e.g. though the home currency is revaluating(More)
The industrial organization approach to the microeconomics of banking augmented by uncertainty and risk aversion is used to examine credit derivatives and macro derivatives as instruments to hedge credit risk for a large commercial bank. In a partial–analytic framework we distinguish between the probability of default and the loss given default, model(More)
We study the impact of transparency in a commodity market on the decision problem of a competitive firm under price uncertainty and hedging opportunities. Market transparency is modeled by means of the informational content of publicly observable signals which are correlated with the random price. We find that the impact of more transparency on labor(More)
This paper examines the production strategies of an international firm. We show that foreign direct investment acts as a signal to overcome an asymmetric information problem in the host-country. We find that a host-country will prefer a situation where a technologically superior (inferior) firm does direct investment (export) compared to the situations(More)
For power-plant investments, utilities rely after liberalisation on private financial markets, which are in general distorted. The (related) split of social and private time-preference rates provides a new reason for a welfare-enhancing policy intervention, complementary to environmental policy (Heinzel and Winkler 2007). This paper quantifies it and(More)
In this paper we study the equilibrium interaction through which the interbank market is related to the public lending and borrowing market. It turns out that this interaction is affected by the transparency in the interbank market. Interbank market transparency is modeled by means of more informative signals about future interbank rates. We find that more(More)
Within the prospect theory the paper examines production and hedging decisions of a competitive firm under price uncertainty. We consider the prospect theory for the firm's utility function in the two moment model known as (mu,sigma)-preference. In contrast to the literature our findings show that the production under uncertainty can be larger than in the(More)
Fears of rising income inequalities loom large in recent discussions of how globalization and in particular migration are affecting economies and societies [1]. This paper addresses the question how labor immigration is related to wage inequality by using a specific-factors trade model. We show that the impact of immigration of low or highly skilled labor(More)