Replacing the Stability and Growth Pact?

The euro-zone division between a single, federal monetary system and separate national fiscal systems is troublesome. The attempt to deal with it via the Stability and Growth Pact has not succeeded. Any hopes that the function of stabilizing asymmetric shocks might be shifted to the federal centre have been dashed by the referendums. I argue that the main concern over the event of a failure of a nation state in the euro-area to meet its debts is the contagious effect that that would currently have on its domestic financial intermediaries. So the proper response would be to enforce significant incremental capital requirements on financial institutions' holdings of such debt.Financial Market Group London School of Economics—United Kingdom. Presidential Address at the Sixty-First International Atlantic Economic Conference, March 15–19, 2006 Berlin, Germany. Presidential Address at the Sixty-First International Atlantic Economic Conference, March 15–19, 2006 Berlin, Germany. My thanks are due to Peter Kenen, Jacques Melitz, Warren Mosler, Waltraud Schelke and Randy Wray and to the editors of this journal fortheir most helpful suggestions, corrections, and advice. All remaining errors are my own.     

Lessons from the early history of the federal reserve

We meet in Germany a little more than one year after the start of a new monetary institution, modeled in part as a federal system like the Federal Reserve with policy operations like those of the Bundesbank. For the past five years, one of my main occupations has been the early history of the Federal Reserve. I have looked in detail at its voluminous records of its formative years. My talk today is a brief summary of some things I have learned. Presidential Address presented at the Forty-Ninth International Atlantic Economic Conference, Munich, Germany, March 14–21, 2000.     

Smith v. Pareto

This paper argues that we do not and cannot actually use Paretian criteria, therefore, I recommend that we stop pretending we do.Presidential Address presented at the Forty-Seventh International Atlantic Economic Conference, Vienna, Austria, March 16–23, 1999.     

PAC Contributions from Sectors of the Financial Services Industry, 1998–2002

This paper explores the relationship between House committee membership and campaign contributions from financial services industry political action committees (PACs) over the 1998–2002 election periods. Three significant pieces of banking legislation were passed during this time. Because members of the financial services industry were affected greatly by this legislation, it seems logical that PACs might attempt to influence the legislative process through the distribution of campaign contributions. We examine the relationship between PAC contributions to individual legislators for the 1998–2002 election cycle and membership on the House banking committee using a sample selection model. We find committee membership matters and the different financial services industry PACs give disproportionately more to representatives with the power to write legislation favorable to the industry. An earlier version of this paper was presented at the October 2007 International Atlantic Economic Conference.     

Twenty-Ninth International Atlantic Economic Conference March 17–23, 1990 Geneva

Twenty-Ninth International Atlantic Economic Conference March 17–23, 1990 Geneva     

Dynamic Linkages between FDI Inflows and Domestic Investment: A Panel Cointegration Approach

This paper analyzes the dynamic relationship between FDI inflows and domestic investment for a panel of selected countries by means of panel cointegration and causality techniques. Specifically, the paper provides empirical evidence regarding the existence of possible crowding in or crowding out effects between FDI inflows and domestic investment, accounting for the location and the level of development of the host countries.The paper was presented at the International Atlantic Economic Conference in London, March 9–13, 2005. The authors wish to thank the participants of the Macroeconomic Topics session for their valuable comments on an earlier draft. We would also like to express our gratitude to G. Chortareas and G. Konteos for helpful comments and suggestions. Nevertheless, the usual disclaimer applies.     

Transparency in monetary policy

The paper examines different aspects of transparency. Transparency serves democratic accountability by promoting public control. Specifically, the degree of transparency conditions inflation expectations, hence the central bank's scope for stabilization. Recent studies have put doubt on the notion that complete transparency is socially desirable. Here it is pointed out that the conclusion critically depends on an asymmetric modelling of stochastic preferences. The paper also reviews the pros and cons of revealing individual voting. A conclusion is that secrecy is to be prefered in monetary unions in order to shield governors from pressure by home governments. Presidential Address presented at the Fifty-Third International Atlantic Economic Conference, March 13–17, 2002, Paris, France.     

Some considerations about 1992

Invited Address at the Twenty-Seventh International Atlantic Economic Conference, March 18–24, 1989, Barcelona, Spain. Partial financial support from CICYT Grants n. PB 86-013 and PB 0340 is gratefully acknowledged.     

The notion of equilibrium in economic theorizing

Presidential Address at the Thirty-First International Atlantic Economic Conference, March 15–22, 1991, Rome.     

Economic theory,institutions, and economic policy

Distinguished Address at the Thirty-Ninth International Atlantic Economic Conference, Vienna, Austria, March 10–16, 1995.     

The threat to the German welfare state

Germany is in a dilemma. Low wage competition via product and factor markets increases the demands on the welfare state, but increased systems competition in the context of international factor mobility reduces the possibilities of maintaining it. The welfare state has important allocative functions. It is an insurance against career risks and its stimulates risk taking and economic growth. However, it also has severe moral hazard effects by reducing work incentives. To help the welfare state survive and improve its performance, this paper advocates the home-country principle for the treatment of immigrants, the introduction of funded elements in the pension system, and employment subsidies at the expense of ordinary welfare payments. Distinguished Address presented at the Forty-Ninth International Atlantic Economic Conference, Munich, Germany, March 14–21, 2000. The author thanks Marcel Thum, Holger Feist, and Michael Reutter for their helpful comments. This paper is based on a lecture first given to the Verein für Socialpolitik in 1998.     

Why organizations matter: A journey away from the fairy tale

This paper contends that a major breakthrough has occurred in economics, that this breakthrough is related to the matching of economics and organization theory, and that this breakthrough is already remodeling our understanding of how economic systems work. Section I comes back to the problem of the existence of organizations and to its generalization through the concept of "governance" structures. Section II develops the explanation provided by transaction cost economics of the trade-off among these structures. Section III compares recent contributions of agency theory and of transaction cost economics to the analysis of the structuring mechanism of formal organizations. Section IV explores some properties of the government of organizations. Section V argues that what precedes may have major consequences on public policies and regulations. Distinguished Address presented at the Forty-First International Atlantic Economic Conference, Paris, France, March 12–19, 1996.     

The Link Between CEO Compensation and Firm Performance: Does Simultaneity Matter?

In order to combat the principle-agent problem, directors of public companies use incentive-based contracts to align the interests of CEOs and shareholders. Some studies suggest that these contracts are an inefficient use of resources, and that they do not motivate CEOs to do what is best for the firm. In this study, the author estimates a regression to find the relationship between CEO Compensation and market value of a firm. In order to address persistence, endogeneity and firm-specific effects the author uses the first-differenced and system GMM regression techniques first used by [Arellano, M.; Bover, O. “Another Look at the Instrumental-Variable Estimation of Error-Component Models,” Journal of Econometrics, 68, 1995, pp. 29–51] and [Blundell, R. W.; Bonds, S. R. “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,” Journal of Econometrics, 87, 1998, pp. 115–43; Blundell, R. W.; Bond, S. R., Windmeijer, F. “Estimation in Dynamic Panel Data Models: Improving on the Performance of the Standard GMM Estimators,” Institute for Fiscal Studies Working Paper W00/12, London, England, 2000]. These regressions report a positive relationship between CEO compensation and market value of a firm. This study concludes that incentive based contracts are effective, due to the positive pay-to-performance link, when controlling for simultaneity. First place winner of the Undergraduate Best Paper Award Competition at the 60th International Atlantic Economic Conference in New York, NY, October 6–9, 2005.     

Why no cycles

This article explains the absence of cycles in regular governmental voting procedures. Most acts of Congress and other legislative bodies are the result of the negotiation carried on in private. As a result of this negotiation, the bill would be impossible to beat by any ordinary alternative. Presidential Address presented at the Forty-Eighth International Atlantic Economic Conference, Montreal, Canada, October 7–10, 1999. An earlier version of this paper was published inA Festschrift for Hans Monisson, University of Wurzberg, Wurzberg, Germany.     

The euro and the monetary union

The Eurosystem established a single monetary policy and has the three guiding principles of independence, transparency, and decentralization. These three principles helped to successfully formulate and implement the euro on 1 January 2002. Major criticisms against establishment of the euro failed to come true and, in fact, the euro has quickly become a major currency in the world. Challenges facing continued success of the euro include structural reforms, financial stability, and the accession of new members to the EU and EMU. TheRobert A. Mundell Distinguished Address presented at the Fifty-Third International Atlantic Economic Conference, March 13–17, 2002, Paris, France.     

Methods of ranking economics journals

This paper reviews and critiques some popular methods of ranking economics journals, compares results of some methods, and suggests new uses of two old methods. International economics journals are ranked and used to provide a vehicle for the analyses. Journal citations over a five-year period provide the data input for the analysis. This study illustrates the significance of the method used in how journals are ranked. The Bradley-Terry model is used to estimate the odds ratios one journal will cite another. The model is also discussed as a possible tool for finding the boundary between fields and field journals. An earlier version of this paper was presented at the Fifty-Sixth International Atlantic Economic Conference in Quebec City, Canada, October 16–19, 2003.     

The impact of 1992 Europe on the United States' economy

Plenary Panel Address at the Twenty-Ninth International Atlantic Economic Conference, March 17–23, 1990, Geneva.     

1992: A new challenge to the social role of business

Plenary Panel Address at the Twenty-Ninth International Atlantic Economic Conference, March 17–23, 1990, Geneva.     

Urban Economic Development and Restorative Justice: Exploring the Relationship Between Creativity and Crime Control

This article examines the relationship between local economic development and a new approach to the problem of crime–i.e., ‘restorative justice.’ The latter concept is introduced and briefly explored, followed by a short review of Richard Florida's recently proposed theory of creative-class economic development. Against the backdrop of these theoretical innovations, an empirical question that arises is whether the specific character of creative-class economic growth enhances the probability that a given city will adopt a restorative justice paradigm in its efforts to reduce crime. Addressing this question using logistic regression analysis, the article provides preliminary evidence that creative-class economic development encourages experimentation with innovative approaches to social problems such as crime. Missouri Western State University—U.S.A. This article is a revised version of a paper presented at the 58th International Atlantic Economic Conference in Chicago, Illinois, October 8, 2004.     

On access pricing with network externalities

It has been argued that access charges may be set optimally by applying the Efficient Component Pricing Rule (ECPR). The paper analyzes the optimality properties of the ECPR in the presence of network externalities in the telecommunications sector. It is assumed that network externalities in the fixed telephony, which is operated by an incumbent monopoly, may arise from the increase in the number of subscribers of a mobile carrier that seeks interconnection to the fixed network. It is shown that the optimality properties of the ECPR that may exist under some restrictive assumptions, do not hold in the presence of network externalities. Specifically, the ECPR may take into account the social opportunity cost with the entry of the competitor, but it fails to incorporate the social benefit accrued to consumers of the fixed telephony when network externalities are present. Presented at the Fifty-First International Atlantic Economic Conference March 13–20, 2001, Athens, Greece. The author would like to thank participants of the Conference, in particular, Michael Pickhardt and Neil Rickman and an anonymous referee for useful comments and suggestions.