Monetary Policy Rules, Policy Preferences, and Uncertainty: Recent Empirical Evidence

We survey recent empirical evidence on monetary policy rules, and find that the emphasis in the political economy literature on institutional design (e.g. central bank independence and inflation targeting) is exaggerated. Formal institutional reform seems neither a necessary nor a sufficient condition for the observation of shifts in monetary policy rules. However, there is no doubt that in some cases (e.g. the UK following the start of inflation targeting in 1992, and Bank of England Independence in 1997), a major shift in monetary policy conduct is detectable. We also highlight the problems in explicitly testing the predictions of the political economy literature. Semi-structural modelling approaches, such as time-varying VAR models may be more useful in understanding policy rules, and the interaction between policy shifts and changes in the transmission mechanism.     

Exploring the need for (extreme) speed: motivations for and outcomes of discontinuous NPD acceleration

ABSTRACT

New product development (NPD) speed is an important concern for firms in today’s fast-paced economy. While existing literature has focused on continuous NPD speed improvements, this paper explores discontinuous NPD acceleration, or dramatic reductions in development time relative to firms’ normal NPD cycles. Across two studies, the authors interview managers to develop a typology of strategic motivations for discontinuous NPD acceleration, followed by a survey of 218 NPD managers to validate the typology and identify important differences across firm types, including those in new product performance, innovation levels, and configurations of organisational characteristics. The results suggest that discontinuous NPD acceleration is most profitable when firms are proactive and have specific configurations of culture, capabilities, and structure. The authors also discuss implications for theory, practice, and future research.     

‘Bankruptcy tourism’ under the EC regulation on insolvency proceedings: A view from England and Wales

This article provides an account of the emergent phenomenon of ‘bankruptcy tourism’—forum shopping by debtors for favourable personal insolvency law—within the EU and with particular reference to England and Wales. After outlining the structural features of the European legal framework that make forum shopping for personal insolvency law possible, including the EC Regulation on Insolvency Proceedings and explaining why England and Wales in particular has proved to be an attractive ‘tourist’ destination, the article charts how the official receivers and the courts in England and Wales have sought to manage the influx of foreign bankruptcies in terms of legal principle and process drawing on two reported cases, Eichler and Mitterfellner. It will be seen that the institutional response in England and Wales has been twofold. First, the ‘problem’ of forum shopping debtors has been framed as a problem of policing the line between genuine and fictional relocations. Secondly, there are signs that the procedural onus on debtors to evidence their claim to English jurisdiction before a bankruptcy order is made has been increased, a move that can be interpreted as a form of institutional resistance designed to raise the barrier to entry. Having sought to illuminate the problems, costs and inconvenience associated with forum shopping from a practitioner standpoint, we explore the ‘good’ versus ‘bad’ forum shopping question and consider the scope for reform of the EC Regulation. Adopting a creditor perspective, we conclude provisionally that the Regulation could usefully be reformed to limit the scope for insolvent debtors to switch their COMI in anticipation of filing for bankruptcy. Copyright © 2010 John Wiley & Sons, Ltd.     

Implementation of voting operators

We show that a theory of implementation can be developed in the Aizerman–Aleskerov framework, capturing the main ideas regarding Nash implementation in the Arrovian case. In fact we obtain the counterparts of the results of [Maskin, E., 1977. Nash Equilibrium and Welfare Optimality. MIT, Mimeo] and [Moore, J., Repullo, R., 1990. Nash implementation. A full characterization. Econometrica 58, 1038–1100] in the new framework.     

The evolution of coastal tourism destinations: a path plasticity perspective on tourism urbanisation

Evolutionary and relational approaches to economic development are gaining ground in geography as a discipline, although in the subfield of tourism geography, their potential is only just becoming recognised. This article focuses on the evolution of mature tourism destinations, taking the path dependency concept forward from the notion of path creation into the new domain of path plasticity. Drawing on the notion of cultural political economy, we examine how tourism destinations can break with path dependency routines incrementally and move steadily towards different future paths, which may recast tourism in a different light in the overall “urban” context of the destination. Using a case study of a Mediterranean coastal destination on Catalonia's Costa Daurada, we explore the inter-tangled tourism and urban development processes in relation to the socio-spatial dimensions of urban change. The article argues for a wider range of social and cultural criteria in the analysis of tourism evolution – advocating the use of path plasticity and a cultural political economy approach – to offer an alternative perspective on shifting tourism situations, reflecting the inherently “urbanising” nature of tourism development in the traditional coastal resort context. It adds to the growing literature on governance and strategy-making in sustainable tourism.     

Business cycles and productivity growth: Are temporary downturns productive or wasteful?

This paper investigates the relationship between the structure of the business cycle and total factor productivity (TFP) growth in U.S. manufacturing. Previous empirical studies on cycle-growth interactions have been conducted at the aggregate level, and have produced mixed results. In contrast, we examine the dynamic linkages between temporary employment shocks and TFP at the industry level, using the NBER Productivity Database. Given the substantial differences in factor intensities, costs and the nature of innovation and productivity-enhancing activities across industries, there are good reasons why cycle-growth interactions may be more readily captured at the sectoral level. We construct an exactly identified Vector Autoregressive model for employment and TFP growth, and find strong support for the “opportunity-cost” view of business cycle-productivity growth interaction. This result suggests that recessions can lead to TFP growth through reorganization and restructuring effects. On the other hand, we find little support for the notion that temporary booms increase TFP through “learning-by-doing” effects. The responsiveness of TFP to employment shocks also seems to be related to the degree of job reallocation within individual industries and the capital intensity of the industry in question. This is further evidence in favour of the view that employment shocks can trigger reorganization effects. Finally, we suggest possible future avenues for this research, including the adjustment of TFP measures to allow for variable factor utilization over the cycle.     

Dividend taxation and intertemporal tax arbitrage

We analyze the effects of changes in dividend tax policy using a life-cycle model of the firm, in which new firms first access equity markets, then grow internally, and finally pay dividends when they have reached steady state. We find that unanticipated permanent changes in tax rates have only small effects on aggregate investment, since macroeconomic dynamics are dominated by mature firms for which dividend taxation is not distortionary. Anticipated or temporary dividend tax changes, on the other hand, create incentives for firms to engage in inter-temporal tax arbitrage so as to reduce investors' tax burden. For example, a temporary tax cut – the type most likely to be enacted by policymakers – induces firms to accelerate dividend payments while tax rates are low, which reduces their cash holdings and makes them capital-constrained when large investment opportunities arise. This can significantly lower aggregate investment for periods after the tax cut.     

Distributional dynamics under smoothly state-dependent pricing

Starting from the assumption that firms are more likely to adjust their prices when doing so is more valuable, this paper analyzes monetary policy shocks in a DSGE model with firm-level heterogeneity. The model is calibrated to retail price microdata, and inflation responses are decomposed into “intensive”, “extensive”, and “selection” margins. Money growth and Taylor rule shocks both have nontrivial real effects, because the low state dependence implied by the data rules out the strong selection effect associated with fixed menu costs. The response to sector-specific shocks is gradual, but inappropriate econometrics might make it appear immediate.