Optimum currency areas and the European experience

Across nations or regions, the debate on optimum exchange rate cum monetary policies is not yet resolved on three levels. First is the optimum domain of fixed exchange rates versus keeping them flexible. Second is the subordinate debate on whether one needs full monetary union (as in continental Europe) to secure an optimum currency area's internal domain; or, whether virtually fixed exchange rates — where national currencies remain in circulation — can be sufficient. Third is whether a regional grouping of economies with close trade ties (as in East Asia) gain by collectively pegging to an outside currency such as the US dollar. Using an axiomatic approach, which limits the set of cross‐country financial claims to what is feasible, I analyse how best to both share and reduce macroeconomic risks on these three levels. JEL classification: F31, F36.     

Exploring the future for pensions pillarisation

The pensions pillarisation agenda envisages a reduction in the role of social insurance while simultaneously advocating the parallel expansion of fully funded private sector, occupational and personal retirement contingencies. Widespread perception of looming state failure in the field of pensions delivery highlights the inherent limitations of current pension delivery arrangements. However, moves to de-emphasise the provision afforded by, predominantly, monopillar state-mandated pension systems by expanding private privision represent short-term palliative responses to deep rooted structural and demographic problems. Multipillar systems appear no more capable of guaranteeing system funding in the face of demographic ageing and structural unemployment than existing monopillar systems. Moreover, a diminished role for social insurance will leave the low paid and unemployed significantly more vulnerable in old age. Consequently, this paper argues for a pension reform agenda which, in terms of levels of income substitution, will secure an adequate social insurance element into the future.     

An Empirical Test of Cognitive Style and Strategic Decision Outcomes*

abstract We examine how cognitive style, as measured by the MBTI, affects strategic decision outcomes. Executives participated in a simulated strategic decision making environment that allowed controlled collection of decision outcomes, including manager decisiveness, decision quality, and perceived effectiveness. We found that iNtuiting/Thinking managers used their intuition to make cognitive leaps based on objective information to craft more decisions of higher quality than other managers. In contrast, Sensing/Feeling types used time to seek socially acceptable decisions, which led to the lowest number of decisions and the lowest perceived effectiveness of all. We found no effect on decisiveness or perceived effectiveness based on a manager's preference for Perceiving or Judging. However, we found that others perceived Extraverted managers as being more effective than Introverted managers when, in fact, the Extraverts were no more decisive than Introverts. Thus, cognitive style influences actual decision outcomes as well as how others perceive one's decision performance.     

What Is Fair? Experimental Evidence

There has been growing interest within the economics discipline in the role of equity concerns in the distribution of resources. This paper presents empirical evidence from controlled laboratory experiments where third-party decision makers allocate resources between two individuals. The experimental results indicate that subjects view a wide range of different allocations as the fair distribution of resources. However, regression analysis indicates that both treatment effects and a few demographic variables explain some of this variation in fairness concepts. Most significantly, decision makers rewarded subjects who earned their favorable positions, and the gender of the decision maker was an important predictor of the allocation chosen.     

The role of capital investment project teams in organisational learning

The management and organisation of capital projects in the British National Health Service (NHS) is dependent upon project teams. An analysis of four case studies shows how these teams also act as agents of learning for individuals and the organisation. This article considers the process by which learning came about. In particular it identifies the ability of the project teams to develop a parallel organisation within a wider organisational context. These teams develop specific rules, roles and relationships which help individual project team members to more effectively share their knowledge with others and their organisation.     

Buyer-Type Effects in Conservation and Preservation Property Values

Properties can be bought by government agencies, land trusts, or private entities for conservation and preservation purposes, such as farmland preservation, wildlife refuges, other conservation, and cultural and historical preservation. There is variation in the dollars paid per acre across properties and across buyer type. An option value model based on future potential land uses is used to explain much of this variation. The data used in our analysis is sales transactions data for conservation and preservation purposes from throughout the United States. We find that much of the value of conservation properties is derived from future potential land uses, including housing, timber, recreation, and conservation. We confirm that public versus private buyers value options differently, which makes sense from a public good point of view, if markets are thin.     

Responsiveness of Auditors to the Audit Risk Standards: Unique Evidence from Big 4 Audit Firms

We examine the effect of changes in audit risk standards on the conduct of financial statement audits in a European setting. We investigate this by analysing the audit hours and audit fees for clients of Big 4 audit firms in Finland in 1996 and 2010. Our results show that audit firms became more sensitive to clients’ business risk due to the introduction of the new audit risk standards, with more audit hours allocated to owner-managed companies in 2010 than in 1996, and fewer audit hours allocated to low-risk clients in 2010 than in 1996. Also, the labour mix in the audit team changed for owner-managed companies, with a greater work load carried by junior auditors in 2010 than in 1996. Regarding the price of audit, we find an increase in audit fees for clients with high business risk, while audit fees remained at roughly the same level for low-risk clients. These findings should be of interest to the auditing profession and those involved in the development of auditing regulations.