Trade flow lags, monetary and fiscal policy, and exchange-rate overshooting

In this paper model a is constructed that combines trade slow lags with the model in the appendix to Dornbusch's seminal paper on exchange-rate dynamics. Here output is free to vary and inflation is determined by a simple Phillips curve mechanism. It turns out that, because of the trade slow lags, monetary expansion causes interest rates to decline, but the exchange rate need not oveshoot, as one would expect; whereas fiscal policy always produces overshooting. It follows that monetary policy may be a less important source of exchange-rate variability than is commonly believed, and fiscal policy more important.     

Decisions nonindustrial forest landowners make: an empirical examination

Our purpose is to estimate a model of non-industrial forest landowner behavior that considers certain types of behavior that have escaped discussion and rigorous investigation in the literature, yet which are critical to future policy making. Our focus on the many different but related decisions landowners make broadens the typical understanding of landowner behavior to show how bequest motives, debt and participation in non-timber activities, and harvesting decisions are interrelated and dependent on landowner preferences, market, and land characteristics.     

Leading from the boardroom

These days, boards are working overtime to comply with Sarbanes-Oxley and other governance requirements meant to protect shareholders from executive wrongdoing. But as directors have become more hands-on with compliance, they've become more hands-off with long-range planning. That exposes corporations and their shareholders to another--perhaps even greater--risk, say professors Lorsch, of Harvard Business School, and Clark, of Harvard Law School. Boards are giving the long term short shrift for a number of reasons. Despite much heavier workloads, directors haven't rethought their patterns of operating - their meetings, committees, and other interactions. Compliance has changed their relationship with executives, however, turning directors into micromanagers who closely probe executives' actions instead of providing high-level guidance. Meanwhile, the pressure to meet quarterly expectations intensifies. Directors need to do a better job of balancing compliance with forward thinking. Boardroom effectiveness hinges most on the quality of directors and their interactions, the authors' research shows. Directors must apply their wisdom broadly, handling compliance work more efficiently and staying out of the weeds on strategic issues. Using their power with management to evangelize for long-term planning, they must take the lead on discussions about financial infrastructure, talent development, and strategy. Reserving sacrosanct time for such discussions, as Philips Electronics' board does at annual retreats, is an effective practice: After one recent retreat, Philips decided to exit the semiconductor business, where it was losing ground. Individual directors also must not shy away from asking tough questions and acting as catalysts on critical issues, such as grooming a successor to the CEO. In short, directors must learn to lead from the boardroom.     

The Role of Pension Business Benefits in Institutional Block Ownership and Corporate Governance*

We investigate whether potential pension contracting benefits lead institutions that provide pension services to acquire ownership blocks in firms and the implications of such blockholdings on the firms' corporate governance. We use the 2006 Pension Protection Act, which expanded pension participation in certain states, as a quasi-exogenous shock and find an increase in block ownership by pension-providing institutions in firms with substantial operations in affected states. Further, we find that the acquisition of a large block increases the likelihood that the institution will provide future pension services to the firm. With regard to corporate governance, we find that the acquisition of large pension blockholdings is associated with higher CEO pay and lower CEO turnover following poor financial performance. However, contrary to the prediction of the private benefits hypothesis, we do not find consistent evidence that large pension blockholdings are associated with declining firm profitability, suggesting that pension institutions are incentivized to exert monitoring to preserve the investment value of their blockholdings. Overall, our evidence is consistent with pension service institutions acquiring ownership blocks to obtain pension contracts, but our evidence does not support the prediction that they use their influence to compromise shareholder value.     

Firm Linkages to Scandals via Directors and Professional Service Firms: Insights from the Backdating Scandal

We examine market reactions to the stock options backdating scandal in a slightly unusual way, but focusing on firms who were not perceived to have had a backdating concern, but were instead linked to firms who did have a backdating concern. These linkages can be found via board interlocks and the roles those directors perform. In addition we examine the linkages which occur from shared professional services firms, such as auditors and outside legal counsel. That these potential conduits are available is not in question, but rather, do investors perceive the conduits are used to pass along information about backdating stock options? We then ask if affiliation with dominant audit and legal services firms ameliorates or exacerbates those investor market reactions. We find that firms linked to the scandalized firms also face negative reactions, which are worsened when they also are serviced by professional services firms who are themselves are also linked to the managerial practice.     

Military reserves and social welfare

We consider the contribution of reserves to the efficient mobilization of military manpower. Our analysis suggests that offering recruits an option to serve as reservists enhances social welfare if there is a sufficiently strong relationship between recruit performance in the military and their expected civilian income.     

Is the dollar peg suitable for the largest economies of the Gulf Cooperation Council?

The slumping of the GCC currencies against other major currencies and the ensuing rising imported inflation have sparked an ongoing debate about the viability of the dollar peg. This paper extends and applies the contribution of Berger et al. (2001) to the largest economies of the GCC, namely Saudi Arabia, Qatar, and the UAE, by introducing a foreign inflation dimension. Empirical estimations suggest little or no evidence supporting the suitability of a fixed exchange rate regime in any of the three analyzed economies. It is this paper's contention that policy makers ought to play an immediate and active role in identifying a suitable more flexible exchange rate regime as well as an achievable timeline and road map to effectively abandoning the dollar peg.