In his important book, Income Distribution (1975), Jan Tinbergen wrote about the race between technological development and education. A major contribution of that work was to unite the supply-oriented human capital theory with the demand-oriented educational planning approach to bring both supply and demand factors into the foreground in analyzing the determination of labor income. He presented a coherent general equilibrium approach within which it was possible to analyze policies and compute welfare. He explicitly considered optimal tax policies.
The present paper provides an unorthodox model of exchange rate determination based on conventions that prevail among market participants. The model relies on a two states Markov switching framework: a bull state and a bear state. In the bull state, agents are optimistic and put more weight on positive news about the domestic economy inducing an appreciation of the domestic currency. In the bear state, agents are pessimistic and overweight negative news associated to the domestic economy leading to a depreciation of the domestic currency. Results show that market switches between a bull state and a bear state explain the dynamics of the euro/dollar exchange rate between January 1995 and December 2008. Besides, the model highlights the life-cycle of conventions in the foreign exchange market and provides lessons for public authorities to reduce exchange rate volatility. Eventually, the model offers a solution to the exchange rate disconnection puzzle.
In general, a corporation in financial distress may take two routes. The first one corresponds to the liquidation in which the assets of the firm are sold either piecemeal or as a going concern. The proceeds from this sale are then divided among all the claimants in accordance with their priority rights. Alternatively, the firm may embark on a reorganization process whose purpose is to find a method to overcome the trouble. Typically, this process involves a negotiation between debtors and creditors with a view to establishing a new mechanism for the settlement of claims: writting off some of the claims, exchanging bonds and other debts with new notes, bonds, swapping new equities for old ones, injection of new capital. This paper aims at providing a formal analysis on the choice between these two options when firms get into financial difficulties.
