Some implications for monetary policy of uncertain exchange rate pass-through

The paper uses MULTIMOD to examine the implications of uncertain exchange rate pass‐through for the conduct of monetary policy. From the policymaker's perspective, uncertainty about exchange rate pass‐through implies uncertainty about policy multipliers and the impact of state variables on stabilization objectives. When faced with uncertainty about the strength of exchange rate pass‐through, policymakers will make less costly errors by overestimating the strength of pass‐through rather than underestimating it. The analysis suggests that pass‐through uncertainty of the magnitude considered does not result in efficient policy response coefficients that are smaller than those under certainty.     

Recent Developments in the Theory of the Firm

Abstract
This article reviews recent literature on the theory of the firm. The issues addressed include the role and determinants of the size of firms, the financial structure and organisation of labour in firms, and the policy implications of this research .     

hayek's economics

The dispersal of information in the economy is the key to Hayek's analysis of economic planning, the trade cycle and entrepreneurship. Gerald Steele, a lecturer at Lancaster University, explores Hayek's analysis. The function of the market is to coordinate this dispersed information.     

Are migrants more skilled than non‐migrants? Repeat,return, and same‐employer migrants

Abstract.  I examine the determinants of inter‐state migration of adults within western Germany, using the German Socio‐Economic Panel from 1984–2000. Migrants who do not change employers represent one‐fifth of all migrants and have higher education and pre‐move wages than non‐migrants. Skilled workers thus have a low‐cost migration avenue that has not been considered in the previous literature. Other migrants are heterogeneous and not unambiguously more skilled than non‐migrants. I confirm that long‐distance migrants are more skilled than short‐distance migrants, as predicted by theory, and I show that return migrants are a mix of successes and failures. Most repeat migration is return migration. JEL classification: J6     

Stabilization, adjustment, and the poor

This paper attempts to survey the recent literature on the impact of stabilization and adjustment programs upon the poor and to consider some of the key issues in the context of a particular equity-oriented low-income country. Tanzania. After looking at some of the approaches of earlier studies, this paper analyzes the effects of restructuring policies, macroeconomic restraint, and strategic policy change. The author then reviews available evidence on the recent experience of Tanzania with external shock, efforts at stabilization, and relations with the IMF.In conclusion, the author argues that in order to better understand their impact on poverty we need more detailed analyses of specific countries' experience with different kinds of macroeconomic imbalance and different short- to medium-term policy responses. However, he does indicate with some certainty that when equivalent external blows impact upon very low-income countries, there must be a presumption that, other things being equal (including the distribution of income), the proportion of households and people pushed over the line into “absolute poverty” will be greater than in middle-income countries. The international community should provide external finance to aid these low-income countries in limiting the negative impact on the poorest.     

The Relation between Market Values,Earnings Forecasts,and Reported Earnings*

Recently, much of the research into the relation between market values and accounting numbers has used, or at least made reference to, the residual income model (RIM). Two basic types of empirical research have developed. The “historical” type explores the relation between market values and reported accounting numbers, often using the linear dynamics in Ohlson 1995 and Feltham and Ohlson 1995 and 1996. The “forecast” type explores the relation between market value and the present value of the book value of equity, a truncated sequence of residual income forecasts, and an estimate of the terminal value at the truncation date. The analysis in this paper integrates these two approaches. We expand the Feltham and Ohlson 1996 model by including one‐ and two‐period‐ahead residual income forecasts to infer “other” information regarding future revenues from past investments and future growth opportunities. This approach results in a model in which the difference between market value and book value of equity is a function of current residual income, one‐ and two‐period‐ahead residual income, current capital investment, and start‐of‐period operating assets. The existence of both persistence in revenues from current and prior investments and growth in future positive net present value investment opportunities leads us to hypothesize a negative coefficient on the one‐period‐ahead residual income forecast and a positive coefficient on the two‐period‐ahead residual income forecast. Our empirical results strongly support our hypotheses with respect to the forecast coefficients.     

Protection for sale with imperfect rent capturing

Abstract .  Grossman and Helpman (1994) explain tariffs as the outcome of a lobbying process. In most empirical implementations of this framework protection is instead measured using non-tariff barriers. Since tariffs allow the government to fully capture the rents from protection, while non-tariff barriers do not, the existing parameter estimates of the protection for sale model are likely to be biased. To address this problem, we augment the framework by considering instruments that allow partial capturing. Our specification is supported by the data, where we find that only 72–75% of the rent from protection is appropriated by the government.