Exchange Rates,Domestic Prices,and Central Bank Actions: Recent U.S. Experience

Central banks that are primarily concerned with the behavior of prices will use monetary policy to try to insulate prices from exchange rate changes. Prices then appear unresponsive to changes in the exchange rate. The observed relationships between prices and the exchange rate will reflect central bank actions instead of the underlying relationship between exchange rates and prices. This paper explicitly recognizes the role that policy plays in determining the observable relationships between exchange rates and prices, and in so doing, it illustrates how the underlying relationships can be unraveled. Using three different empirical approaches, we examine the recent experience of the United States. We find that the prices of various nondurable goods, and even of some services, respond modestly to the exchange rate, and we find that the responses emerge most clearly when the role of monetary policy is explicitly considered. These findings are consistent with the hypothesis that the Federal Reserve acts to mitigate the effects of exchange rate fluctuations on domestic prices.     

Reflections on longitudinal action research with the English National Health Service

This paper reflects on a longitudinal collaborative action research programme between the Centre for Research in Strategic Purchasing and Supply and the UK National Health Service Purchasing and Supply Agency that has operated since 1995. During the collaboration, research has changed practice and practice has changed research. A framework for analysing change is introduced as a means of examining how supply strategy has changed during the course of the research. The framework is applied to three supply strategy cases of prosthetics, clinical waste and cardiology, illustrating how practice and research have changed and influenced the production of knowledge over time. The methodological, theoretical and managerial implications of such longitudinal action research programmes are reflected on.     

Does freezing a defined benefit pension plan affect firm risk?

This paper examines the impact of a defined benefit (DB) pension plan freeze on the sponsoring firm's risk and risk-taking activities. Using a sample of firms declaring a hard freeze on their DB plans between 2002 and 2007, we observe an increase in total risk (proxied by the standard deviation of EBITDA and asset beta), equity risk (standard deviation of returns), and credit risk following a DB-plan freeze. The increase in credit risk is reflected in a decline in credit ratings and an increase in bond yields for freezing firms. When we examine investment strategies, we observe a shift in investment from capital expenditures before the freeze to more-risky R&D projects after the freeze, and an increase in leverage. These strategies (increased focus on R&D and higher leverage) increase the operating and financial risk the firm faces. Overall, we observe an increase in risk-taking following DB plan freezes, consistent with theories that DB plans act as “inside debt” that aligns managers’ interests with bondholders’.     

Cooperation in environmental policy: a spatial approach

Inefficient competition in emissions taxes for foreign direct investment creates benefits from international cooperation. In the presence of cross-border pollution, proximate (neighboring) countries have greater incentives to cooperate than distant ones as illustrated by a model of tax competition for mobile capital. Spatial econometrics is used to estimate participation in 110 international environmental treaties by 139 countries over 20 years. Empirical evidence of increased cooperation among proximate countries is provided. Furthermore, strategic responses in treaty participation vary across country groups between OECD and non-OECD countries and are most evident in regional agreements.     

Book reviews

Innovation and Industrial Strength in the UK, West Germany, United States and Japan Joan Cox &; Herbert Kriegbaum London, Policy Studies Institute, 1989, 168pp. Industrial Societies After the Stagnation of the 1970s. Taking Stock from an Interdisciplinary Perspective Burkhard Strumpel (ed.) Berlin, de Gruyter, 1989, 313pp.

The Social Basis of the Microelectronics Revolution Alfonso Hernan Molina Edinburgh, Edinburgh University Press, 1989, xxi + 260pp., £25.00 h/b (also avail-able in p/b)

Innovation and Technology Transfer in Japan and Europe: Industry-Academic Relations Glynn 0. Philips (assisted by Michael Hughes) London, Routledge, 1990, 282pp.) £45.00

Banking 1992-A Eurostudy Special Report Ian Gillespie (ed.) I,ondon, Eurostudy Publishing, 1990, 162pp., $£60 ($99)     

The relationship between job satisfaction and managerial remuneration in small and medium-sized enterprises: an empirical test of ‘comparison income’ and ‘equity theory’ hypotheses

The relationship between job satisfaction levels and the remuneration of non-owner managers employed by a sample of 97 UK small and medium sized enterprises (SMEs) is investigated. The main empirical findings are that relative remuneration levels appear to be largely explained by differences in human capital and job/firm characteristics and that job satisfaction is positively related to deviations from these estimated comparison-income levels. Moreover, the equity theory expectation that individuals with the least prospect of redressing payment inequities will have the greatest incentives to respond to payment inequities by congitive adjustment is also supported. The results indicate that job satisfaction levels for individuals expecting to remain in their current post are not significantly affected by current payment inequities. For those managers who expect to move firms, the amount of payment inequity has a significantly positive effect upon their job satisfaction.     

Consumers' Freedom of Choice

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes. The bearing of the foregoing theory on the first of these is obvious (Keynes, 1936, p. 372).     

Book and Film Reviews

Economic theory as applied to the family should increase our understanding of the phenomena we are studying, and allow us to implement fruitful intervention in cases where we are not satisfied with what is occurring. Much if not all of the theory of the family fails to achieve these aims. Examples are given from the most recent edition of Gary Becker's Theory of the Family, where the analysis leads to conclusions that are, on their face, preposterous. This kind of theorizing leads, as does almost all neoclassical theory, to a conclusion that the institutions depicted are benign, and that government intervention would be useless at best and probably harmful. But it isn't necessarily so.     

Teaching digital models: secondary technology teachers’ experiences

International Journal of Technology and Design Education - In secondary technology education, models of artifacts, systems and processes, visualized and simulated through digital tools (digital...