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Investments and financial structure with imperfect financial markets: an intertemporal discrete-time framework

Marco Mazzoli ()

Heterogeneity and monetary policy from Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica

Abstract: This paper deals with the problem of simultaneity between the firm's investments and financial structure, in a context of dynamic optimization, characterised by two main assumptions: first of all, diverging incentives for managers and shareholders, secondly, financial markets imperfections generating a risk premium on the borrowed finance. A ''discrete-time'' framework has been introduced in order to better model the relevance of timing in the co-ordination process between financial and investment decisions, assumed to take place simultaneously. The simple model proposed here may provide some intuitive interpretation for a number of phenomena such as the propagation of financial shocks into the real economy and the countercyclical mark-ups.

Keywords: investments; financing policy. (search for similar items in EconPapers)
JEL-codes: E22 G32 (search for similar items in EconPapers)
Date: 2000-07
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