A time-varying volatility approach to modeling the phillips curve: A cross-country analysis

This research examines the Phillips curve price adjustment mechanism allowing for the conditional variance of inflation to be time varying. Specifically, we estimate ARCH and GARCH models of inflation for Canada, Japan, and the U.K. The results suggest that an increase in the conditional variability of inflation leads to higher levels of inflation. In addition, inclusion of inflation variability in the Phillips curve model results in a higher weight being attributed to the output gap than in traditional models. (JEF E24)     

How would compliance with dietary recommendations affect revenues for agricultural producers?

Nutritionists and other health experts have recommended a range of dietary plans, and these often differ significantly. Although the USDA food guides have been the most visible in the United States, other dietary plans now are achieving greater public recognition. Our analysis extracts the nutrient recommendations for seven dietary plans and models the recommendations as shifts in demand for the nutrients. Demand shifts for nutrients are combined with nutrient composition shares to simulate the revenue implications in selected agricultural markets. Based on current consumption patterns in the United States, we find that compliance with Harvard’s Healthy Eating Pyramid would generate the greatest revenue gains for specialty crop producers in California.     

Conduct in narrativized trust games

We “narrativize” a basic extensive form trust game by placing participants in a story that contextualizes the interaction with an unforeseeable future. In our narrative experiment, participants consider each decision as a character, advancing the story with their choices for salient payoffs. Our interest is in understanding how participants apply Adam Smith's rules of beneficent and just conduct in our narrativized games with epistemic conditions of an unknown future, conditions which aren't possible in extensive form. We invite our readers to participate in the story of the results, making meaning as participants in a narrative that unfolds with their choices.     

Virtuous Professionalism in Accountants to Avoid Fraud and to Restore Financial Reporting

Over the past decade, a number of accounting and financial reporting frauds have led to lost stock wealth, destroyed public trust, and a worldwide recession that called for necessary reform. Regulatory responses and systemic reforms quickly followed, and we show that, while necessary, these reforms are insufficient. The purpose of this paper is to forward virtuous professionalism as a necessary path toward restoring financial reporting systems. We take the position of external observer and analyze the accounting profession over time to assess what has transpired within our financial reporting systems. Our analysis reveals that the combined influence of commercialism and regulatory response has led to a systemic decline in accounting’s professional ideals and, as a result, an erosion of public trust. We then propose virtuous professionalism as a necessary process for restoring financial reporting systems based on sociological, professional, and philosophical theories. We argue that virtuous professionalism is necessary for restoring the public servant identity of the accounting professional. We conclude that efforts to restore financial reporting systems should begin with reforms that restore professional identity shaped by virtues.     

Equity‐Based Incentives,Risk Aversion,and Merger‐Related Risk‐Taking Behavior

We find that post‐merger equity risk is negatively related to the sensitivity of CEO wealth to stock return volatility (vega), but is concentrated in CEOs with high proportions of options and options that are more in‐the‐money. The probability of industrial diversification also increases in vega. Additional tests show that the decline in post‐merger equity risk results in a significant decrease in shareholder wealth. This decrease is concentrated among firms with CEOs having the highest delta and the highest delta and vega. Our results suggest that the increased convexity provided by option‐based compensation does not necessarily increase risk‐taking behavior by CEOs.