Operations of a Pension Fund after the Asian Crisis: The Thai Experience*

During and after the Asian crisis, institutional investors and pension funds in Asian financial markets have been confronted with a number of difficulties effecting their performance and the way they carry out their role within the national pension system. We analyze these problems by comparing the actual investment policy of an institutional investor with an optimal investment strategy derived from the insights of modern portfolio theory. We also analyze whether the organizational set‐up of a pension fund allows it to adequately perform its role within the pension system. As an example, we examine the operations of the Thai Government Pension Fund (GPF). We find that allowing international investments and reducing restrictions on equity investments while lowering the implicit requirements for investments in government debt would allow the GPF to further diversify its investment risk and to increase its risk‐adjusted return. We also show that some changes in the governance structure of the GPF would lower the occurrence of conflicts of interest for the management and increase the efficiency of the GPF operations.     

Evaluating FOMC forecasts

Monetary policy outcomes have improved since the early 1980s. One factor contributing to the improvement is that Federal Reserve policymakers began reporting economic forecasts to Congress in 1979. These forecasts indicate what the Federal Open Market Committee (FOMC) members think will be the likely consequence of their policies. We evaluate the accuracy of the FOMC forecasts relative to private sector forecasts, the forecasts of the Research Staff at the Board of Governors, and a naïve alternative. We find that the FOMC output forecasts were better than the naïve model and at least as good as those of the private sector and the Fed staff. The FOMC inflation forecasts were more accurate than the private sector forecasts and the naïve model; for the period ending in 1996, however, they were not as accurate as Fed staff inflation forecasts.     

China＇s Social Security： Case Studies of the Interest Groups and Policy Monopoly

This section introduces an asymmetric information model to analyze the interest groups and policy monopoly in social security management, mainly focusing on the relation between the interest groups in the social security products market and the social security government institutions at the central level, namely the major social security policy makers.     

COMPUTABLE GENERAL EQUILIBRIUM MODELS FOR DEVELOPMENT POLICY ANALYSIS IN LDCs

Abstract. The use of CGE models has gained much popularity among policy analysts in LDCs and there is a fast growing body of literature on this area of economics. In this survey, the advantages of general equilibrium approach over partial equilibrium approach in analysing a wide range of policy issues are highlighted. The evolution of CGE modelling is discussed and more than 60 CGE applications related to different policy issues in LDCs are surveyed. This comprehensive survey shows that the CGE models have become quite popular analytical tools among policy analysts in LDCs over the last decade or so. The debate in the economic profession regarding the value and appropriateness of using CGE models for policy analysis is examined in the final section of this paper. Some of the criticisms levelled at CGE models are discussed and it is argued that despite this criticism such models are capable of providing insight into important policy problems.     

Rethinking the role of NCBs in the EMU

Five years after the introduction of unified monetary policy in the EMU, some member countries are wondering whether they have ceded too much of their policy-making powers. The fact that National Central Banks no longer carry out sizable expansionary open market or foreign exchange market operations suggests that they face substantially reduced abilities to set economic policy.This paper demonstrates that, in fact, very little power has been yielded: on the fiscal front, the force of such policy initiatives is enhanced by the fixity of the exchange rate. On the monetary front, we show that there is an observational equivalence between all Central Bank actions under fixed exchange rates. This implies that the authorities retain the same amount of policy flexibility as before. So long as they use an alternative form of policy initiative, carrying out what previously would have been characterized as sterilized foreign exchange market operations, their ability to influence the macro performance of their economy is undiminished.     

More thinking on research methods for the resource‐based perspective

We re‐examine the benefits of using a broader set of research methods to address key questions associated with the resource‐based view (RBV) of the firm. In responding to Levitas and Chi, we consider how research inside organizations can complement and augment research relying on secondary data. Copyright © 2002 John Wiley & Sons, Ltd.     

Innovative productivity and returns to scale in the pharmaceutical industry

This study shows that firms in the pharmaceutical industry experience decreasing returns to scale in R & D as the level of R & D expenditures rises. The paper presents the results of our study of the innovative output of 16 pharmaceutical firms over a 19 year period. Given the strong correlation between R & D budgets and firm size, our study suggests the wave of mergers in the industry may yield less innovative productivity than managers expect.     

Last resort gambles, risky debt and liquidation policy

This paper develops a real option model in which the interaction between debt, liquidation policy and risky investments is studied. We consider a manager who owns the firm and faces the opportunity to invest in risky projects which may boost current profits at the cost of bankruptcy if they turn out to be unsuccessful. These investments are “last resort gambles” in the sense that, if successful, they save the company from insolvency, while, if unsuccessful, they make liquidation unavoidable. It is shown that last resort gambles delay liquidation. We study how the liquidation trigger and the last resort investment decisions are affected by the firm's capital structure.     

Cap and trade policies in the presence of monopoly and distortionary taxation

We extend an analytical general equilibrium model of environmental policy with pre-existing labor tax distortions to include pre-existing monopoly power as well. We show that the existence of monopoly power has two offsetting effects on welfare. First, the environmental policy reduces monopoly profits, and the negative effect on income increases labor supply in a way that partially offsets the pre-existing labor supply distortion. Second, environmental policy raises prices, so interaction with the pre-existing monopoly distortion further exacerbates the labor supply distortion. This second effect is larger, for reasonable parameter values, so the existence of monopoly reduces the welfare gain (or increases the loss) from environmental restrictions.