We develop a simple theoretical model of investment under the assumption that financial frictions generate adjustment costs different from those of industrial origin that are normally discussed in the literature. We identify several restrictions that are used to test and estimate the model using...

This work develops a portfolio model of the banking firm where both the size and composition of the portfolio are jointly determined. The model provides a quite simple micro-foundation of the credit channel of the transmission of monetary policy. It allows analysing the pricing policies of the...

We use a simple model of investment and external finance to analyze the relationship among the issuance of securities, financial market valuations and, alternatively, aggregate investment or cash flows. We find that issuance is driven by market valuations, and does not influence aggregate...

This paper proposes a dynamic model of the optimal choices of a bank that benefits from market power and takes into account the impact of the deposit generation process. Interbank lending/borrowing emerges as a buffer that assists the bank in smoothing intertemporal adjustments in interdependent...

This paper studies empirically the link between financial market volatility and primary placements of stocks and bonds for the US economy. We find that the impact of volatility on primary placements is not statistically significant.