Discretionary monetary policy and the zero lower bound on nominal interest rates

Ignoring the existence of the zero lower bound on nominal interest rates one considerably understates the value of monetary commitment in New Keynesian models. A stochastic forward-looking model with an occasionally binding lower bound, calibrated to the U.S. economy, suggests that low values for the natural rate of interest lead to sizeable output losses and deflation under discretionary monetary policy. The fall in output and deflation are much larger than in the case with policy commitment and do not show up at all if the model abstracts from the existence of the lower bound. The welfare losses of discretionary policy increase even further when inflation is partly determined by lagged inflation in the Phillips curve. These results emerge because private sector expectations and the discretionary policy response to these expectations reinforce each other and cause the lower bound to be reached much earlier than under commitment.     

Industrial Clusters and Corporate Social Responsibility in Developing Countries: What We Know,What We do not Know,and What We Need to Know

This article provides a review of what we know, what we do not know, and what we need to know about the relationship between industrial clusters and corporate social responsibility (CSR) in developing countries. In addition to the drivers of and barriers to the adoption of CSR initiatives, this study highlights key lessons learned from empirical studies of CSR initiatives that aimed to improve environmental management and work conditions and reduce poverty in local industrial districts. Academic work in this area remains embryonic, lacking in empirical evidence about the effects of CSR interventions on the profitability on local enterprises, workers, and the environment. Nor do theoretical frameworks offer clear explanations of the institutionalization and effects of CSR in local industrial districts in the developing world. Other key limitations in this research stream include an excessive focus on export-oriented industrial clusters, the risk that CSR becomes a form of economic and cultural imperialism, and the potential for joint-action CSR initiatives in clusters of small and medium-sized enterprises to offer a new form of greenwashing. From this review, the authors develop a theoretical model to explain why CSR has not become institutionalized in many developing country clusters, which in turn suggests that the vast majority of industrial clusters in developing countries are likely to engage in socially irresponsible behavior.     

Management’s personal ideology and financial reporting quality

Review of Quantitative Finance and Accounting - We investigate the relation between managers’ personal ideologies and financial reporting quality. We use Federal Elections Commission data to...