We study the decision an entrepreneur faces in financing multiple projects and show that relationship financing will arise endogenously in an environment where strategic defaults are likely, even when firms have access to arm's-length financing. Relationship financing allows an entrepreneur to...

In a homogeneous-good duopoly game with a home and a foreign firm, which compete on prices, it has been shown that the optimal way to assist the domestic industry is by a production subsidy. The argument here is that the subsidy is used to keep potential competitive pressure on the foreign firm....

It is shown that the equivalence of tariffs and quotas is not valid if one defines equivalence in terms of welfare. In a duopoly where a home and a foreign firm compete on a domestic market, an optimal quota leads to a lower welfare than an optimal tariff. Still, any import quantity can be...

The paper presents a unified treatment of optimal trade policy for a small country. The well-known results for duopoly and competitive markets emerge as benchmark cases of the authors' model. In addition, it is shown that changes in market structure have nonmonotonic effects on optimal tariffs....

In this paper we re-investigate the comovements of interest rates in the G7-countries. We propose a structured modus operandi to analyze the time series characteristics of interest rates and to test for common features. We conduct cointegration, serial correlation common feature and codependence...

Daily data from the German and U.S. equity markets before and after the introduction of the Euro are used to study the effect of exchange rate regime choices on equity markets. It is found that, since the introduction of the Euro, the volatility and the persistence of the German stock index have...

The use of tariffs in the absence of subsidies in small countries is an empirical observation which stands in sharp contrast to the theoretical literature of trade policy. We analyze the welfare effects of tariffs and subsidies in a homogeneous good duopoly game with cost asymmetries between the...