Assessing ways to establish an equal tax treatment of different sources of funding could thus be an important step forward. Moreover, distortions of investors’ decision making emerge from heterogeneous and in some countries inefficient national insolvency laws. Obviously, any such reform should take risks to financial stability and the potential for regulatory arbitrage into account. Further reading Buch, Claudia M. (2015).
This paper develops and estimates a habit persistence consumption asset pricing model in which the sign of the equilibrium covariance between equity and bond returns depends on the reduced-form correlation between inflation and the output gap, the correlation between the federal funds rate and the output gap, as well as the equilibrium persistence of inflation.