Price Theory and the Study of Deception in the Exchange Process

The general equilibrium approach in orthodox economics largely abstracted from the passing of time. In a timeless world, strategy and deception are difficult to define. The mainstream analysis of the second half of the twentieth century was mostly about establishing the limits within which price ratios might profitably vary in a world where people keep promises and are honest. Curiously, another group of milestones (some of which date back to the 1920s and 1930s) exist that, when taken together, may spark a renewed interest in the economics of fraud and deception.     

The Henry George Theorem and the Entrepreneurial Process: Turning Henry George on his Head

This chapter offers an interpretation of the Henry George Theorem (HGT) that brings it squarely into the study and analysis of entrepreneurship somewhat loosening its ties to the subfield of urban economics. I draw on the pioneering work of Spencer Heath whose insights about the viability of proprietary communities were developed further by his grandson, Spencer Heath MacCallum who, in 1970, recognized that private real estate developers sometimes make their capital gains (mostly) by creating useful public spaces that others enjoy. I also draw inspiration from Fred Foldvary's effort in 1994 to synthesize the pubic goods problem in economics with the Henry George Theorem in urban economics. While the real estate owner—developer does emerge on my pages in a somewhat more favourable light than as originally portrayed by Henry George in his Progress and Poverty in 1879, I offer a realistic appraisal of the duplicitous behaviours required of such entrepreneurs. in the context of the modern regulatory state. Real estate development remains a 'hot button' item in local politics, and real estate developers must become genuine 'political entrepreneurs' if they are to complete their projects in a timely way and capture business profits. It is a complicated story that the HGT helps make intelligible in terms of human action.     

From inflation to exchange rate targeting: Estimating the stabilization effects for a small open economy

This paper attempts to estimate possible losses in macroeconomic stabilization due to a move from inflation to exchange rate targeting on the example of the Czech Republic. The authors use an estimated New Keynesian policy model, typical inflation and exchange rate targeting rules, and representative central bank loss functions to carry out these estimations. The authors find that for the Czech Republic, moving from the historically applied inflation targeting to optimized exchange rate targeting should not involve any significant losses in macroeconomic stabilization. However, the Czech National Bank could improve its stabilization outcomes while remaining an inflation targeter. This requires the Czech National Bank to respond more strongly to increasing expected future inflation and to be less concerned about an opening output gap when adjusting its policy rate. Moving then from such optimized inflation targeting to optimized exchange rate targeting can result in significant losses in economic stabilization in the magnitude of 0.4–2% points of GDP growth.     

What drives provincial‐Canada yield spreads?

Abstract.  Although recent research has led to a deeper understanding of the factors determining yields on long-term Canada bonds, there has been little corresponding work on provincial bonds. By using a carefully constructed new data set, we establish two important results. First, provincial fiscal positions (debt and deficits) are an important factor in determining yield spreads between provincial and Canada bonds. Second, we show that provincial bonds are a substitute for corporate debt, in that during recessionary 'flights to quality' their yields react like those on corporate bonds.     

What If the Leader of the Central Bank Told Hilarious Jokes and Did Card Tricks? A Panel of Experts

Abstract . A panel of distinguished experts discuss the linkages (if any) between monetary policy and the personality of the nation's central banker. Why is the personality of a central banker important to monetary stability and financial leadership? What follows is a written edited version of the short papers that were presented at this panel. The panel was held in Olin Auditorium on Tuesday, April 25, 2006, as part of the Carpenter Lecture Series at Babson College.     

Investment and Arbitrage Opportunities with Short Sales Constraints

In this paper we consider a family of investment projects defined by their deterministic cash flows. We assume stationarity—that is, projects available today are the same as those available in the past. In this framework, we prove that the absence of arbitrage opportunities is equivalent to the existence of a discount rate such that the net present value of all projects is nonpositive if the projects cannot be sold short and is equal to zero otherwise. Our result allows for an infinite number of projects and for continuous as well as discrete cash flows, generalizing similar results established by Cantor and Lippman (1983, 1995) and Adler and Gale (1997) in a discrete time framework and for a finite number of projects.     

National corporate governance institutions and post‐acquisition target reorganization

We examine the characteristics of national systems of corporate governance to theorize about the nature of the shareholders' and employees' interests when it comes to reorganization, under the assumption that the firm is coalitional in nature. We argue that corporate governance institutions prevalent in both the host and the target country of the merging firms enable or constrain the ability of the acquirer to reorganize the target. Using a cross‐national dataset of corporate acquisitions and post‐acquisition reorganization, we found support for our predictions that stronger legal protection of shareholder rights in the acquirer country compared to the target country increases the acquirer's ability to restructure the target's assets and leverage the target's resources, while the protection of employee rights in the target country restricts the acquirer's ability to restructure the target's assets and redeploy resources to and from the target. Copyright © 2009 John Wiley & Sons, Ltd.     

Does Fiscal Stimulus Cause Too Much Debt?

This study distinguishes between temporary fiscal stimulus to combat a recession and two other debt-raising policies: financial bailouts and spending on Medicare, Medicaid, and Social Security. Two striking conclusions emerge from our simulations of the impact of a temporary fiscal stimulus on the economy. First, the fiscal stimulus effectively mitigates the recession. Second, debt as a percentage of GDP is only slightly greater with the fiscal stimulus than it would be without the stimulus.