Exchange Rate Effects of Central Bank Interventions: An Analysis of Transaction Prices

The impact of sterilised interventions by the Swiss National Bank on the Swiss franc/U.S. dollar exchange rate is examined for the 1986–94 period. The paper extends results from earlier studies by using the actual prices of interventions. Based on the fact that all Swiss National Bank interventions are announced, our test exploits the informational differences between interventions and customer transactions. A key finding is that only initial interventions matter; customer transactions and subsequent interventions have no influence.     

GOVERNMENT DECENTRALIZATION AS A DISINCENTIVE FOR TRANSNATIONAL TERROR? AN EMPIRICAL ANALYSIS*

Using panel data for a maximum of 109 countries over the years 1976–2000, we empirically analyze the impact of decentralization on the occurrence of transnational terror. Our results show that expenditure decentralization reduces the number of transnational terror events in a country, while political decentralization has no impact. These results are robust to the choice of control variables and method of estimation.     

What Was Driving the 1982–88 Boom In Temporary Employment?

Abstract . The level of temporary help employment rose two-and-a-half fold between 1982 and 1988, was quite variable and had a disproportionately larger effect on employment flows. One conventional explanation suggests that changing demographic composition of the labor force in favor of groups preferring nontraditional employment arrangements fueled the temporary help boom. Demand-side views emphasize the volatility in labor demand, intensified price competition and the absence of employee benefit contributions. Empirical estimation confirms that demand-side forces predominate. Yet no labor supply variable is found to be positively associated with the extent of temporary employment. Cyclical fluctuation in output, intensified foreign competition and the magnitude of nonwage labor costs are all positively associated with temporary employment levels. The diminishing bargaining power of labor unions allows employers to exploit the labor cost savings of temporary hires, and the extent of paid time-off and the lack of flexibility in weekly hours of work play a weak role. The findings suggest why temporary job growth accelerated in the 1980s, as more firms employed a “core-periphery” human resource strategy. Public policy should adopt measures that attempt to limit the creation of temporary jobs to a level that accommodates the worker need for flexible annual work schedules.     

Coal: For Miners or Consumers?

Nationalisation promised to run the coal industry efficiently in the public interest. But nationalisation is politicisation. The consumer is replaced by party politics. Despite surplus stocks, the National Union of Mineworkers under Arthur Scargill resists concentration on the most efficient pits. The industry has become an engine not for coal production but for Job preservation.     

Imperfect Information and Credible Communication

This paper analyzes a communication game between a sender and receiver with misaligned incentives. Because of the misalignment, in equilibrium, the sender's privately observed information is not perfectly communicated. We study the relation between the quality of the sender's information and the quality of the information communicated. We establish that the quality of information communicated is a non-monotonic function of the quality of the sender's information, and it is maximized when the sender has imperfect information. We suggest that our model applies to a setting where an equity research analyst communicates information about a firm's value to investors.     

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Session Topic: Individual Investors and Mutual Funds

Summary . The modern theory of finance suggests that most investors should put part or all of their money into a “market portfolio” mixed with borrowing or lending. Empirical evidence generally supports the theory, but there are some unanswered questions about the composition of the best market portfolio, about the apparent attractiveness of low risk stocks relative to high risk stocks, and about ways of minimizing transaction costs. Attempts to create a fund based on these principles and to make it available to a large number of investors have uncovered some important problems. Legal costs due to government regulation, the costs of managing a fund, and especially the costs of selling it are all much higher than one might expect. Despite these problems, efforts to create such funds seem destined for eventual success.