INTERNATIONAL PRODUCTION,INVESTMENT AND BORROWING WITH EXCHANGE RATE RISK AND FUTURES MARKETS

In this paper we consider a multinational firm under exchange rate and interest rate risks in a multiperiod model. We analyze the impact of exchange rate uncertainty and the use of currency futures on the risk-averse firm's decisions about home and foreign production. Without any hedging markets exchange rate risk lowers foreign investment and output. However, when futures markets exist, the separation property holds. Introducing another source of uncertainty, such as the interest rate, which is nondiversifiable, affects the production in both countries, i.e., the separation property does not hold. However, we show that the adverse effect of the missing financial market (to hedge against this additional risk) disappears when international borrowing is available.     

Dynamic Influences on Individual Choice Behavior

Research examining the process of individual decision making over time isbriefly reviewed. We focus on two major areas of work in choice dynamics:research that has examined how current choices are influenced by the historyof previous choices, and newer work examining how choices may be made toexploit expectations about options available in the future. A central themeof the survey is that if a general understanding of choice dynamics is toemerge, it will come through the development of boundedly-rational models ofdynamic problem solving that lie on the interface between economics andpsychology.     

Hedging exchange rate risk: The multiperiod case

We analyse production and hedging in a multiperiod framework for a risk-averse exporting firm facing a random exchange rate. We extend the separation theorem to this multiperiod model. Our study shows that unbiased currency forward markets in all periods do not imply standard full hedging. Under some conditions, the firm tends to overhedge compared to the one-period hedging models.     

Risk-aversely efficient random variables: Characterization and an application to growth under uncertainty

Consider a problem of choice from a set R of multivariate random variables. Let us examine only efficient elements of R which are optimal choices of risk averse decision-makers (whose aim is to maximize expected utility over R). We obtain a price characteristic of all risk-aversely efficient random variables in R. This result has been applied to multi-sector optimal growth model to obtain a characterization by competitive prices of all risk-aversely efficient stationary consumption programs.     

The meaning of work,employment relations,and strategic human resources management in Israel

The paper deals with the meaning of work, employment relations, and strategic human resources management. First it shows that Israeli workers have become more individualistic and materialistic, and less collectively oriented, as instrumental achievements outweigh contributions to society. These issues apparently influence employment relations and organizational policies. Next, it deals with the corporatist employment relations system, based on tri-partite collective bargaining among employees, employers, and the state. During various times, the relative balance of power among the three parties swayed considerably, according to major political, economic and social events taking place in society. The final section on strategic human resources management focuses on the transition of Israel's Human Resources profession, from the traditional HR role to the new Strategic Human Resource Management role. These three spheres have gone through some significant changes in the last several decades, perhaps not parallel to most industrial nations.     

Stochastic growth with short-run prediction of shocks

We study a variation of the one-sector stochastic optimal growth model with independent and identically distributed shocks where agents acquire information that enables them to accurately predict the next period??s productivity shock (but not shocks in later periods). Optimal policy depends on the forthcoming shock. A ??better?? predicted realization of the shock that increases both marginal and total product always increases next period??s optimal output. We derive conditions on the degree of relative risk aversion and the elasticity of marginal product under which optimal investment increases or decreases with a better shock. Under fairly regular restrictions, optimal outputs converge in distribution to a unique invariant distribution whose support is bounded away from zero. We derive explicit solutions to the optimal policy for three well-known families of production and utility functions and use these to show that volatility of output, sensitivity of output to shocks, and expected total investment may be higher or lower than in the standard model where no new information is acquired over time; the limiting steady state may also differ significantly from that in the standard model.     

Public education under capital mobility

The paper considers a two-country model of overlapping generations economies with intergenerational transfers motivated by altruism and investment in human capital. We examine in a non-stationary competitive equilibrium the optimal provision of education with and without capital market integration. First, we explore how regimes of education provision—public, private or mixed—arise and how they affect the dynamics of autarkic economies. Second, we study the effects of capital market integration, in equilibrium, on the optimal provision of education. Third, we show that capital market integration enhances government intervention in the provision of public education (to improve the welfare of its constituents) and consider various solutions to such a competition.     

On the behavioral differences between professional and amateur investors after the weekend

This paper compares the trading patterns of amateur and professional investors during the days following the weekend. The comparison is based on all the daily transactions of a large sample of both amateurs and professionally managed investors in a major brokerage house in Israel from 1994 to 1998. We find that weekends influence both amateurs and professional investors; however they affect them in opposite directions. Individuals increase both their buy and sell activities, and their propensity to sell rises more than their propensity to buy. Professionals on the other hand tend to perform fewer buy as well as sell trades after the weekend, but unlike individuals, the drop in their activity is almost the same for buy trades and for sell trades.