MACROECONOMIC POLICY AND ELECTIONS IN OECD DEMOCRACIES*

The purpose of this paper is to test for evidence of opportunistic “political business cycles” in a large sample of 18 OECD economies. Our results can be summarized as follows: 1) We find very little evidence of pre-electoral effects on economic outcomes, in particular, on GDP growth and unemployment; 2) We see some evidence of “political monetary cycles,” that is, expansionary monetary policy in election years; 3) We also observe indications of “political budget cycles,” or “loose” fiscal policy prior to elections; 4) Inflation exhibits a post-electoral jump, which could be explained by either the pre-electoral “loose” monetary and fiscal policies and/or by an opportunistic timing of increases in publicly controlled prices, or indirect taxes.     

Examining the Leontief Paradox in U.S. Agricultural Trade

Factor intensity of United States agricultural trade is examined in the context of Leontief's classic paradox using Leontief's method as well as methods developed recently by Leamer and others. Findings indicate that factor endowments are important determinants of U.S. agriculture's comparative advantage in trade as suggested by the Heckscher-Ohlin theory.     

The evolution of Canadian international travel documentation

Canada's geographic position, adjacent to the United States and comparatively distant from other countries, has concentrated a very large part of the foreign travel into a north-south flow. The development of international travel statistical methodologies has been patterned upon this heavy preponderance of travel. The evidence shows that the magnitude and scope of the flow of people and money between Canada and the United States necessitated that a cooperative approach be taken by both countries in undertaking this large-scale, continuous statistical operation. Canada's international travel statistical methodologies have demonstrated a flexibility to adapt to changing travel patterns and the reduction in border restrictions and documentation. At the same time, the statistical systems have had to meet increased demands of international tourism on a global scale.     

Strategic human resource management and firm effectiveness in industries experiencing decline

Unstable economic conditions, in conjunction with other external and internal influences, have prompted attempts to understand the nature of organizational decline. While a number of issues have been carefully considered in recent theory and research, little effort has been made to consider the implications of human resource management practices for firms in declining industries. The present study examined human resource practices in three industries that experienced decline, and investigated the relationship of organizational performance with effective human resource management.     

Money,activity and prices: Some inter-country evidence

The paper explores the relationships between monetary variables and real economic activity and prices in the six largest industrialized economies. Univariate and multivariate time series forecasting models are used to break down monetary policy variables into anticipated and unanticipated components. Overall monetary policy variables, particularly domestic credit expansion, appear to be significant leading indicators for subsequent real economic activity and prices. Additionally, anticipated components of monetary policy are shown to have as much forecasting ability for subsequently realized economic variables as unanticipated components. This does not appear to be consistent with the implications of pure rational expectations models. It was also noted that results differed significantly according to the choice of monetary variable and across individual countries. In particular the results implied no contradiction with previous findings for the impact of unanticipated money supply in the U.S., though such contradictions would have appeared if DCE had been used as the monetary variable.     

LEVERAGING THE UNDERINVESTMENT PROBLEM: HOW HIGH DEBT AND MANAGEMENT SHAREHOLDINGS SOLVE THE AGENCY COSTS OF FREE CASH FLOW

It is argued that leveraged buyouts (LBOs) provide managers with a powerful incentive to release excess cash rather than invest in negative net present value projects. This incentive is attributed to the large debt obligations associated with “junk” bond financing and to an increase in the shareholdings of top management. In this paper I explore the conditions under which leverage and management shareholdings complement one another in resolving the agency costs of free cash flow and would therefore optimally be used “together” as in an LBO. Complementarity is shown to obtain under plausible conditions, essentially because increased leverage reduces equityholders' share of investment returns. Increased management shareholdings then leverage this underinvestment effect. My analysis also helps explain why top managers who participate in an LBO receive a highly leveraged equity claim rather than a share of the “strip” that is generally provided to outside investors.     

Small-sample properties of dimensionality statistics for fitting VAR models to aggregate economic data: A Monte Carlo study

The analysis of aggregate economic phenomena by VAR's as suggested by Sims often results in a small sample relative to the number of estimated parameters. Since the model is identified by a dimensionality criterion, the small-sample properties of available criteria are important. This paper presents a study of small-sample properties for six criteria with Monte Carlo methods. It is found that no criterion performs well, and that underfitting of models may be quite common.