Monetary and fiscal policy interactions in a New Keynesian model with capital accumulation and non-Ricardian consumers

The paper examines simple monetary and fiscal policy rules consistent with determinate equilibrium dynamics in the absence of Ricardian equivalence. Under this assumption, government debt turns into a relevant state variable which needs to be accounted for in the analysis of equilibrium dynamics. The key analytical finding is that without explicit reference to the level of government debt it is not possible to infer how strongly the monetary and fiscal instruments should be used to ensure determinate equilibrium dynamics. Specifically, we identify bifurcations associated with threshold values of steady-state debt, leading to qualitative changes in the local determinacy requirements.     

Accession to the euro-area: a stylized analysis using a NK model

This paper analyses the accession to the euro-area by new members using a stylized new-Keynesian model. We analyze macroeconomic adjustment in the pre- and post-accession case and calculate welfare in both situations to obtain net benefit/loss from accession. It is shown how the effects of accession is related to the conduct of monetary policy and fiscal policy in the pre- and post-accession case. The simulation examples point at the potential costs that accession might entail due its consequences on monetary and fiscal policy design. These consequences from accession in terms of macroeconomic stabilization ability of monetary and fiscal policies have not always been fully acknowledged and may need more attention.     

Sociality and money1

This is a translation of ‘Socialité et argent’, a text by Emmanuel Levinas originally published in 1987. Levinas describes the emergence of money out of interhuman relations of exchange and the social relations – sociality – that result. While elsewhere he has presented sociality as ‘nonindifference to alterity’ it appears here as ‘proximity of the stranger’ and points to the tension between an economic system based on money and the basic human disposition to respond to the face of the other person. Money both encodes and effaces sociality, both designates and disguises social relations. It arises from the way that needs and interests are manifested in exchange relations, in what he calls the ‘interestedness’ of economic life. But interests are always already cut through by the fact that being is always ‘being with others’. Being is always ‘interbeing’. Interestedness is always confronted by disinterestedness, that is, by a sociality marked by the ‘goodness of giving’, attachment to and concern for the poverty of the other person. Levinas concludes with a discussion of sociality and justice, posing questions about the tension between the demand to respond to an Other immediately before me and at the same time to respond to the demands of an other Other (the third person) who also invites a response.     

Learning about fundamentals: The widening of the French ERM bands in 1993

Learning about Fundamentals: The Widening of the French ERM Bands in 1993. — The authors incorporate a Bayesian learning model into a fairly general model of exchange rate determination in discrete time. The model is applied to the period following the widening of the French-German ERM bands in August 1993, in which a systematic underprediction of the franc can be observed until February 1994. A (substantial) part of these forecast errors can be mimicked by a Bayesian learning process. Simulations with our model show that, after the widening of the bands, agents, contrary to their initial expectations, gradually learned that the true process driving monetary conditions in France had not changed notably.     

Practitioners' forum perestroika and soviet biotechnology

This article summarizes the findings of a UK Department of Trade and Industry 'Overseas Science and Technology Expert Mission' on Biotechnology to the USSR, made over the period 15-24 September 1989. The mission visited some of the most important basic research institutes working in biotechnmology in the Moscow region, including the 'Biocity' of Poushchino, and Kiev in the Ukrainian SSR. These institutes ranged from primarily basic research to ones which had strong links with industrial production. We report on the scientific and technical level of some of the most advanced Soviet centres, such as the Shemyakin Institute of Bioorganic Chemistry, the most important and prominent biotechnology institute in the USSR. The peculiar problems which best Soviet research in the field are described in the context of perestroika, the current restruing of Soviet society.     

The Fair Value of Cash Flow Hedges,Future Profitability,and Stock Returns

The SEC and FASB recently expressed concerns that investors do not fully assimilate all of the information provided by complex and incomplete derivatives and other comprehensive income (OCI) disclosures. My evidence supports these concerns. Specifically, I examine the information content of unrealized cash flow hedge gains/losses for future profitability and stock returns. An unrealized gain on a cash flow hedge suggests that the price of the underlying hedged item (i.e., commodity price, foreign currency exchange rate, or interest rate) moved in a direction that will impair the firm's profits after the hedge expires. Consequently, I find that unrealized cash flow hedge gains/losses are negatively associated with future gross profit after the firm's existing hedges have expired. This association only holds after the firm has reclassified its hedges into earnings, and is weaker for firms that can pass input price changes on to their customers. Finally, investors do not immediately price the cash flow hedge information. Instead, investors appear surprised by future realizations of gross margin, consistent with the view that complex and incomplete disclosures delay pricing. These results are relevant to policymakers involved in the current FASB and IASB project designed to simplify the accounting and disclosure for derivatives and, in particular, cash flow hedges.     

Acting More Generously than the Law Requires: The Issue of Employee Layoffs in halakhah

In this paper, the issue of plant closings is analyzed from the perspective of halakhah (the Written Law of Judaism). Two levels of analysis in halakhah must be differentiated: the legal (enforced by courts) and the moral (not enforced by law, but rather framed in terms of duty to God). There is no legal mandate to keep an unprofitable plant open, but there are a number of moral imprecations (particularly "acting more generously than the law requires") that might influence an employer's decision making. Using analogical reasoning to infer moral and/or legal obligations may be a fruitful means for businesspeople to analyze business situations in terms of ethical implications.     

The Internationalization of Small and Medium-Sized Firms

This paper contributes to the existing research by integrating the notions of organizational learning and entrepreneurial orientation into the body of international entrepreneurship. Our primary framework combines learning theory and the new venture theory of internationalization to study the extent to which small and medium-sized companies engage in international activities. We found that the firms’ international learning effort and entrepreneurial orientation are positively associated with internationalization intent whereas domestic learning effort is negatively related with internationalization intent. Overall, our results suggest (1) that intensive knowledge renewal and exploitation regarding foreign markets and the internationalization process itself may increase internationalization by affecting the perceptions of opportunities offered by further international expansion, and (2) that firms with an entrepreneurial mindset may be more likely to develop a long-term, substantial presence in the international arena, compared to firms that are more reactive or conservative.     

Experimental analysis of choice

Experimental choice analysis continues to attract academic and applied attention. We review what is known about the design, conduct, analysis, and use of data from choice experiments, and indicate gaps in current knowledge that should be addressed in future research. Design strategies consistent with probabilistic models of choice process and the parallels between choice experiments and real markets are considered. Additionally, we address the issues of reliability and validity. Progress has been made in accounting for differences in reliability, but more research is needed to determine which experiments and response procedures will consistently produce more reliable data for various problems.Sawtooth SoftwareDecision Research