strategic and regulatory approaches to increasing women in leadership multilevel targets and mandatory quotas as levers for cultural change while substantial evidence is emerging inter nationally of positive increases in the participation of women on company boards there is less evidence of any significant change in the proportion of women in senior executive ranks this paper describes evidence of positive changes in the number of women on boards in australia unfortunately these changes are not mirrored in the senior executive ranks where the proportion of women remains consistently low we explore some of the reasons for these disproportionate changes and examine the likely effect of the recent amendments to the australian stock exchange s corporate governance code designed to improve gender diversity both on boards and throughout organisations based on the early corporate response to these regulatory changes it is interesting to consider whether australia s approach in promoting voluntary self regulation at the corporate level may be as effective in the long run as the emerging trend in europe to apply legislated quotas for female corporate board representation interview evidence is presented suggesting that the primary reasons for the lack of women in leadership are not simply lack of opportunity at the apex of the corporation but issues at mid management level that are unlikely to be resolved by mandatory board quotas in some circumstances carefully monitored voluntary targets may be more effective at promoting cultural and strategic change at the heart of the corporation in summary mandatory quotas set through hard law usually with sanctions for noncompliance may achieve early and significant results in terms of female board representation however voluntary targets for women s participation on boards and in executive ranks proposed in soft regulation such as corporate governance codes and set as part of corporate strategy may promote more effective cultural and practical change in support of greater representation of women in leadership

women directors on corporate boards from tokenism to critical mass academic debate on the strategic importance of women corporate directors is widely recognized and still open however most corporate boards have only one woman director or a small minority of women directors therefore they can still be considered as tokens this article addresses the following question does an increased number of women corporate boards result in a build up of critical mass that substantially contributes to firm innovation the aim is to test if at least three women could constitute the desired critical mass by identifying different minorities of women directors one woman two women and at least three women tests are conducted on a sample of 317 norwegian firms the results suggest that attaining critical mass going from one or two women a few tokens to at least three women consistent minority makes it possible to enhance the level of firm innovation moreover the results show that the relationship between the critical mass of women directors and the level of firm innovation is mediated by board strategic tasks implications for both theory and practice and future research directions are discussed

estimating intertemporal allocation parameters using synthetic residual estimation we present a novel structural estimation procedure for models of intertemporal allocation this is based on modelling expectations errors directly we refer to it as synthetic residual estimation sre the flexibility of sre allows us to account for measurement error in consumption and for heterogeneity in intertemporal allocation parameters an investigation of the small sample properties of the sre estimator indicates that it dominates generalized method of moments gmm estimation of both exact and approximate euler equations in the case when we have short panels and noisy consumption data we apply sre to two panels drawn from the panel study of income dynamics psid and estimate the joint distribution of the discount factor and the elasticity of intertemporal substitution we reject strongly homogeneity of the discount factor and the elasticity of intertemporal substitution we find that on average the more educated are more patient and less willing to substitute intertemporally than the less educated within education strata patience and willingness to substitute are positively correlated 2010 the review of economic studies limited

inflation and reputation in many macroeconomic models with rational expectations optimal policy is time inconsistent and therefore announced policy may not be credible this paper models the government s credibility explicitly using kreps and wilson s analysis time consistent optimal government policy emerges as a sequential equilibrium in a repeated game this policy is at least as good as the inconsistent optimal policy and dominates the consistent policy when reputational effects are ignored thus the analysis resolves the problem of specifying a credible optimal policy in such models the results show why attempts to disinflate may lead to recession even with perfectly flexible prices this abstract was borrowed from another version of this item

semiparametric inference in dynamic binary choice models we introduce an approach for semiparametric inference in dynamic binary choice models that does not impose distributional assumptions on the state variables unobserved by the econometrician the proposed framework combines bayesian inference with partial identification results the method is applicable to models with finite space of observed states we demonstrate the method on rust s model of bus engine replacement the estimation experiments show that the parametric assumptions about the distribution of the unobserved states can have a considerable effect on the estimates of per period payoffs at the same time the effect of these assumptions on counterfactual conditional choice probabilities can be small for most of the observed states

on the notion of time consistency a comment abstract it is the purpose of this paper to show that the concept of time consistency is not uniquely defined in the economics literature in non causal models holly and zarrop s 1983 time consistency concept differs from the corresponding concept by kydland and prescott 1977 a policy sequence which according to kydland and prescott is time consistent is time inconsistent in holly and zarrop s terms whereas a plan which is consistent in the sense of holly and zarrop is inconsistent in the sense of kydland and prescott

tricks with hicks the easi demand system we invent implicit marshallian demands which combine desirable features of hicksian and marshallian demands we propose and estimate the exact affine stone index easi implicit marshallian demand system like the almost ideal demand aid system easi budget shares are linear in parameters given real expenditures however unlike the aid easi demands can have any rank and its engel curves can have any shape over real expenditures easi error terms equal random utility parameters to account for unobserved preference heterogeneity easi demand functions can be estimated using gmm or three stage least squares and like aid an approximate easi model can be estimated by linear regression

women on the board and managers pay evidence from spain the current literature shows great interest in the issue of gender diversity on boards of directors some studies have hypothesized a direct relationship between diversity and the value of the firm but not many examine the intermediate mechanisms that may exert an influence on such relationships we employ two stages of gmm estimation methodology to exhibit evidences of the relationship between gender diversity and compensation of top managers in the spanish context results show that gender diversity positively affects the effectiveness of boards in terms of composition structure size and functioning influencing a proper design of top managers compensation linked to company performance evidences suggest that legislative actions aimed at increasing the presence of women on boards of directors are justified not only for ethical reasons but also for reasons of economic efficiency

axiomatization and measurement of quasi hyperbolic discounting this article provides an axiomatic characterization of quasi hyperbolic discounting and a more general class of semi hyperbolic preferences we impose consistency restrictions directly on the intertemporal trade offs by relying on what we call annuity compensations our axiomatization leads naturally to an experimental design that disentangles discounting from the elasticity of intertemporal substitution in a pilot experiment we use the partial identification approach to estimate bounds for the distributions of discount factors in the subject pool consistent with previous studies we find evidence for both present and future bias jel codes c10 c99 d03 d90

rational expectations and the effect of exchange rate intervention on the exchange rate a theoretical model is proposed in which the exchange rate is affected by current and capital account transactions and the central bank intervenes in the foreign exchange market by buying and selling foreign exchange the effects of this intervention on the exchange rate are explored under the assumption that exchange rate expectations are formed rationally and solutions are obtained for the perfect and imperfect foresight cases the paper concludes with a discussion of the non optimality of time inconsistent policies when exchange rate expectations are rational

the money pump as a measure of revealed preference violations we introduce a measure of the severity of violations of the revealed preference axioms the money pump index mpi the mpi is the amount of money one can extract from a consumer who violates the axioms it is also a statistical test for the hypothesis that a consumer is rational when behavior is observed with error we present an application using a panel data set of food expenditures the data exhibit many violations of the axioms mostly the mpi for these violations is small the mpi indicates that the hypothesis of consumer rationality cannot be rejected

international corporate entrepreneurship and firm performance the moderating effect of international environmental hostility abstract globalization of the world economy has encouraged u s companies to leverage their resources and skills by expanding into existing or new foreign markets u s companies have also acquired new capabilities by locating important functional activities overseas and joining with foreign partners in new markets through alliances and joint ventures these opportunities however are tempered by the constraints imposed by the competitive forces that exist in international environments aggressive government intervention technological changes and fierce local rivalries all contribute to hostile international environments for u s firms global expansion success in global business operations requires resourcefulness and entrepreneurial risk taking the activities of u s companies in foreign markets therefore provide a unique opportunity to examine the effects of international corporate entrepreneurship ice efforts on company performance ice is defined as the sum of a company s efforts aimed at innovation proactiveness and risk taking these efforts offer an important means of revitalizing and renewing established companies and improving their performance few studies have empirically examined the effects of ice activities on companies financial performance this study used data from 98 u s companies to 1 determine the impact of ice efforts on firm performance and 2 explore the moderating effect that the perceived hostility of the international environment has on the relationship between ice and company performance the results showed that ice was positively associated with a firm s overall profitability and growth as well as its foreign profitability and growth those firms that aggressively pursued ice in international environments with higher levels of hostility had higher return on assets roa but did not achieve significantly higher levels of growth however as hostility in the international environment continued to intensify roa rose and then fell as companies increased their ice activities thus there was a point of diminishing returns to a company s aggressive pursuit of ice under excessive environmental hostility the results highlight both the rewards and risks of pursuing ice companies benefit from ice activities by achieving higher overall performance as well as foreign profits and growth in revenue however the aggressive pursuit of ice does not always guarantee superior performance our results show that the payoff from ice is moderated by executives perceptions of the hostility of their firm s international business environment our findings highlight the importance of ice for organizational success both overall and in foreign markets yet the results compellingly suggest that there are upper limits to the potential gains a firm achieves from its aggressive pursuit of ice when the international environment in which it competes is hostile

paying not to go to the gym how do consumers choose from a menu of contracts we analyze a novel dataset from three u s health clubs with information on both the contractual choice and the day to day attendance decisions of 7 752 members over three years the observed consumer behavior is difficult to reconcile with standard preferences and beliefs first members who choose a contract with a flat monthly fee of over 70 attend on average 4 3 times per month they pay a price per expected visit of more than 17 even though they could pay 10 per visit using a 10 visit pass on average these users forgo savings of 600 during their membership second consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year this is surprising because monthly members pay higher fees for the option to cancel each month we also document cancellation delays and attendance expectations among other findings leading explanations for our findings are overconfidence about future self control or about future efficiency overconfident agents overestimate attendance as well as the cancellation probability of automatically renewed contracts our results suggest that making inferences from observed contract choice under the rational expectation hypothesis can lead to biases in the estimation of consumer preferences

monetary mystique secrecy and central banking abstract the paper contains a discussion of the role of secrecy in the implementation of monetary policy it documents the federal reserve s defense of secrecy as argued in a recent freedom of information act suit the federal reserve s arguments are evaluated on the basis of economic theory theoretical papers related to the secrecy issue are reviewed the discussion highlights a number of potential benefits and costs of central bank secrecy and identifies some conditions under which secrecy could be socially beneficial

principles of fiscal and monetary policy abstract this paper describes a complete and internally consistent set of principles for the conduct of a welfare maximizing fiscal and monetary policy issues of time consistency that arise in applying these principles to actual economics are also discussed

gender diversity in the boardroom and firm performance what exactly constitutes a critical mass the under representation of women on boards is a heavily discussed topic not only in germany based on critical mass theory and with the help of a hand collected panel dataset of 151 listed german firms for the years 2000 2005 we explore whether the link between gender diversity and firm performance follows a u shape controlling for reversed causality we find evidence for gender diversity to at first negatively affect firm performance and only after a critical mass of about 30 women has been reached to be associated with higher firm performance than completely male boards given our sample firms the critical mass of 30 women translates into an absolute number of about three women on the board and hence supports recent studies on a corresponding magic number of women in the boardroom

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

rational expectations and policy credibility following a change in regime we examine the dynamic path of an economy after a change in regime when neither the policy to be followed nor the reactions of the public are known the model is an application of kreps and wilson s reputation model to barro and gordon s macroeconomic policy game equilibrium is defined to be the dynamically consistent solution to a game between the government and the private sector it involves mixed strategies and bayesian learning by both sides until the uncertainty about government and public behaviour is resolved the absence of complete credibility of government policy and intransigence of private sector wage demands increase the output loss of disinflation the analysis also sheds light on the strategic nature of economic policymaking and the role of information in macroeconomics

aggregate information and the role of monetary policy in an open economy a model of a small open economy in which agents trade in local goods markets and an economy wide asset market is developed purchasing power parity is assumed to hold at the aggregate level however because of local deviations from purchasing power parity agents possess differential information using this framework it is shown that when the exchange rate is flexible monetary policy can influence the distribution of real output by altering the information content of the exchange rate however when monetary policy is committed to fixing the exchange rate by a feedback rule the distribution of real output is independent of the particular exchange rate rule chosen the stability of real output under the two regimes is compared and it is demonstrated that regardless of the stability of domestic monetary policy a flexible exchange rate regime is superior in this respect possible qualifications and extensions of these results are also discussed

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

does confucianism reduce board gender diversity firm level evidence from china this study extends previous literature on the association between confucianism and corporate decisions by examining confucianism s influence on board gender diversity using a sample of chinese listed firms during the period of 2001 2011 and geographic proximity based confucianism variables i provide strong and consistent evidence to show that confucianism is significantly negatively associated with board gender diversity suggesting that the proportion of women directors in the boardroom is significantly lower for firms surrounded by strong confucianism atmosphere than for firms located in regions with weak confucianism atmosphere this finding also implies that confucian philosophical system has important impacts on business ethics and women s status in corporate governance moreover gdp per capita the proxy for economic development level in a province in which a firm is located attenuates the negative association between confucianism and board gender diversity above results are robust to different measures of confucianism and board gender diversity and are still valid after controlling for the potential endogeneity between confucianism and board gender diversity

alternative financial policy rules in an open economy under rational and adaptive expectations the potential instability of a fixed monetary rule combined with automatic fixed stabilisers is a well established feature of closed economy is lm models with wealth effects and asset accumulation this paper examines the stability issue in a general open economy macromodel with alternative expectations mechanisms rational or adaptive in both the labour market and the foreign exchange market the fixed monetary rule is found to be stabilising only in special cases notably when post tax real interest rates are negative and the foreign exchange market is characterised by high capital mobility and rational expectations by contrast the alternative rule of fixing the rate of growth of nominal government debt is stable for a wide range of parameter values and alternative expectations schemes

index number issues in the consumer price index he boskin commission has ful lled a useful purpose there is now un precedented public interest in price measurement issues and an increasedawareness on the part of academics about the dif cult problems involvedin measuring price change in a dynamic economy there is also increased coop eration between economists and statisticians in attempting to solve these problems this comment offers some perspectives on the magnitude of the differences be tween the xed base laspeyres price index that statistical agencies produce and atheoretical cost of living index along with some thoughts about what can be doneto reduce these differences or biases

household consumption when the marriage is stable we develop a novel framework to analyze the structural implications of the marriage market for household consumption we de ne a revealed preference characterization of e cient household consumption when the marriage is stable stability means that the marriage matching is individually rational and has no blocking pairs we characterize stable marriage with intrahousehold consumption transfers but without assuming transferable utility we show that our revealed preference characterization generates testable conditions even with a single consumption observation per household and heterogeneous individual preferences across households the characterization also allows for identifying the intrahousehold decision structure including the sharing rule under the same minimalistic assumptions an application to dutch household data demonstrates the usefulness of our theoretical results we nd that the female gets a higher income share when her relative wage increases which we can give a structural interpretation in terms of outside options from marriage that vary with individual wages

when do board and management resources complement each other a study of effects on corporate social responsibility following resource based and complementary asset perspectives this paper examines the effects of board and management resources on corporate social responsibility csr in a sample of large australian public firms specifically this study posits that outside directors and women on boards are complementary in that their multiplicative effect incrementally influences csr above their individual independent effects the hypothesis is confirmed further the study tests the interactive effect of a senior csr manager determining the independent and complementary effects of managerial resources upon board resources the results suggest that a senior csr manager has both an independent and complementary effect offering support for the hypotheses the findings offer some confirmation of resource based theory demonstrating that board resources can be complementary within the boardroom context and complementary to management in positively affecting firm outcomes

how demanding is the revealed preference approach to demand a well known problem with revealed preference methods is that when data are found to satisfy their restrictions it is hard to know whether this should be viewed as a triumph for economic theory or a warning that these conditions are so undemanding that almost anything goes this paper allows researchers to make this distinction our approach uses an axiomatic characterization of a measure of predictive success due to selten 1991 we illustrate the idea using a panel dataset the results show that this approach can lead us to radically reassess our view of the empirical performance of economic theory

who is more rational we report on the results of a large scale field experiment that enables us to test for consistency with utility maximizing behavior and to investigate the correlation between individual behavior and demographic and economic characteristics we conducted the experiment with the centerpanel a representative sample of over 2 000 dutch households using procedures similar to those used by choi et al 2007b in a setting with risk we find a high level of consistency in the individual level decisions there is also considerable heterogeneity in subjects consistency scores high income and high education subjects display greater levels of consistency men are more consistent than women and young subjects are more consistent than those who

the paradox of diversity initiatives when organizational needs differ from employee preferences women are underrepresented in the upper echelons of management in most countries despite the effectiveness of identity conscious initiatives for increasing the proportion of women many organizations have been reluctant to implement such initiatives because potential employees may perceive them negatively given the increasing competition for labor attracting talent is relevant for the long term success of organizations in this study we used an experimental design n 693 to examine the effects of identity blind and identity conscious gender diversity initiatives on people s pursuit intentions toward organizations using them we used counterfactual thinking derived from fairness theory as a guiding framework for our hypothesis development and investigated the moderating influence of a forthcoming government mandated gender quota as well as individual characteristics e g gender participants reviewed statements regarding workplace diversity initiatives and rated either the initiatives effectiveness or indicated their intentions to pursue employment with organizations using them of those rating pursuit intentions half were informed that the country in which they were conducting their job search was about to implement gender quotas results indicated a diversity management paradox such that initiatives perceived as more effective made organizations using them less attractive as employers however these negative perceptions were mitigated by a government mandated quota and also lower among women implications for the study and practice of diversity are discussed

appointments pay and performance in uk boardrooms by gender this article uses uk data to examine issues regarding the scarcity of women in boardroom positions the article examines appointments pay and any associated productivity effects deriving from increased diversity evidence of gender bias in the appointment of women as non executive directors is found together with mixed evidence of discrimination in wages or fees paid however the article finds no support for the argument that gender diverse boards enhance corporate performance proposals in favour of greater board diversity may be best structured around the moral value of diversity rather than with reference to an expectation of improved company performance

seminonparametric estimation of conditionally constrained heterogeneous processes asset pricing applications the overidentifying restrictions of the intertemporal capital asset pricing model are usually rejected when tested using data on consumption growth and asset returns particu larly when additively separable constant relative risk utility is attributed to the representa tive agent this article investigates the extent to which specification error can explain these rejections the empirical strategy is limited information maximum likelihood in conjunc tion with seminonparametric expanding parameter space representations for both the law of motion and utility we find that consumption growth and asset returns display conditional heterogeneity but this fact does not account for rejection of the overidentifying restrictions as might be anticipated from the work of hansen singleton and others using generalized method of moments methods we also find that expansion of the parameter space in the direction of nonseparable utility causes the overidentifying restrictions to be accepted our estimation strategy provides information on the manner in which the restrictions distort the law of motion in particular imposition of additively separable constant relative risk aversion utility causes the conditional variance of consumption growth to be overpredicted the conditional covariance of asset returns with consumption growth to be overpredicted and an equity premium imposition of nonseparable seminon parametric utility causes distortion in these same directions though the distortions are much smaller which is consistent with the outcomes of the tests of the restrictions

unobserved preference heterogeneity in demand using generalized random coefficients we model unobserved preference heterogeneity in demand systems via random barten scales in utility functions these barten scales appear as random coefficients multiplying prices in demand functions consumer demands are nonlinear in prices and may have unknown functional structure we therefore prove identification of generalized random coefficients models defined as nonparametric regressions where each regressor is multiplied by an unobserved random coefficient having an unknown distribution using canadian data we estimate energy demand functions with and without random coefficient barten scales we find that not accounting for this unobserved preference heterogeneity substantially biases estimated consumer surplus costs of an energy tax jel codes c14 d12 d13 c21 keywords unobserved heterogeneity nonseparable errors random utility parameters random coefficients equivalence scales consumer surplus welfare calculations the authors wish to thank jinyong hahn richard blundell stefan hoderlein rosa matzkin and anonymous referees for helpful discussions and suggestions earlier versions of this paper were circulated under the

testing data for consistency with revealed preference the author develops a method of hypothesis testing for revealed preference tests this method is particularly well suited to tests of commonality of tastes or tests of preference stability he devises a metric based on an estimate of the fraction of expenditure wasted in maximizing utility if all consumers in the sample share the same utility function this metric increases in size with increases in the proportion of observations having different tastes and with increasing differences in tastes the author proposes bootstrap methods for estimating the distribution of the test statistic copyright 1995 by mit press

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

aggregation without separability a generalized composite commodity theorem this paper provides general conditions for aggregating commodities without separable utility these conditions impose weaker and more empirically plausible restrictions on price movements than the currently existing alternative to separability the hicks leontief composite commodity theorem the idea is to allow departures from hicks leontief that take the form of well behaved error terms utility functions that permit generalized composite commodity aggregation include the aids model the translog all homothetic utility functions and any utility function when demands are aggregated to two groups of goods implications of empirical nonstationarity of relative prices for aggregation and demand estimation are considered copyright 1996 by american economic association

board of director gender and corporate tax aggressiveness an empirical analysis this study examines the impact of board of director gender diversity on corporate tax aggressiveness based on a sample of 418 u s firms covering the 2006 2009 period 1672 firm year observations our ordinary least squares regression results show a negative and statistically significant association between female representation on the board and tax aggressiveness after controlling for endogeneity our results are consistent across several measures of tax aggressiveness and additional robustness checks

consumer prices the consumer price index and the cost of living after presenting major findings and recommendations the cpi commission reiterates the estimate of a 1 1 percentage point per annum upward bias it rejects the contention that the bls already makes substantial corrections for quality change that quality improvements and new products accrue only to the rich and that procedures to make more extensive quality adjustments valuations of new products and adjustments for commodity and outlet substitution are impractical the bias in the cpi can be sharply reduced as the authors detail in this paper coauthors are ellen r dulberger robert j gordon zvi griliches and dale w jorgenson

household intertemporal behaviour a collective characterization and a test of commitment in this paper a formal test of intra household commitment is derived and performed to that end two models of household intertemporal behaviour are developed in both models household members are characterized by individual preferences in the first formulation household decisions are always on the ex ante pareto frontier in the second model the assumption of intra household commitment required by ex ante efficiency is relaxed it is shown that the full efficiency household euler equations are nested in the no commitment euler equations using this result the hypothesis that household members can commit to future allocations of resources is tested using the consumer expenditure survey i strongly reject this hypothesis it is also shown that the standard unitary framework is a special case of the full efficiency model however if household members are not able to commit household intertemporal behaviour cannot be characterized using the standard life cycle model these findings have two main implications first policy makers can change household behaviour by modifying the decision power of individual household members second to evaluate programmes designed to improve the welfare of household members it would be beneficial to replace the standard unitary model with a characterization of household behaviour that allows for lack of commitment

nonparametric engel curves and revealed preference this paper applies revealed preference theory to the nonparametric statistical analysis of consumer demand knowledge of expansion paths is shown to improve the power of nonparametric tests of revealed preference the tightest bounds on indifference surfaces and welfare measures are derived using an algorithm for which revealed preference conditions are shown to guarantee convergence nonparametric engel curves are used to estimate expansion paths and provide a stochastic structure within which to examine the consistency of household level data and revealed preference theory an application is made to a long time series of repeated cross sections from the family expenditure survey for britain the consistency of these data with revealed preference theory is examined for periods of consistency with revealed preference tight bounds are placed on true cost of living indices

does board gender diversity influence financial performance evidence from spain in recent years several countries have enacted guidelines and or mandatory laws to increase the presence of women on the boards of companies through these regulatory interventions the aim is to eradicate the social and labor grievances that women have traditionally experienced and which has relegated them to smaller scale jobs nevertheless and despite the advances achieved the female representation in the boardroom remains far from the desired levels in this context it is now necessary to enhance the advantages of board gender diversity from both ethical and economic points of view this article examines the relation between board gender diversity and economic results in spain the second country in the world to legally require gender quotas in boardrooms and historically characterized by a minimal female participation in the workforce based on a sample of 125 non financial firms listed on the madrid stock exchange from 2005 to 2009 our findings show that in the period analyzed the increase of the number of women on boards was over 98 this suggests that compulsory legislation offers an efficient framework to execute the recommendation of spanish codes of good governance by means of the increase in the number of women in the boards of firms furthermore we find that the increase in the number of women on the boards is positively related to higher economic results therefore both results suggest that gender diversity in boardrooms should be incremented mandatory laws being a key factor to do so

a nonparametric test of the life cycle rational expectations hypothesis in a world of perfect certainty and perfect capital markets agents allocate expenditure in such a way that the marginal utility of discounted expenditure is the same in each period in this paper we present a test of whether any particular series of discounted prices and quantities can be exactly reconciled with a utility function and marginal utility of discounted expenditure that do not change from period to period we find that uk us and canadian postwar aggregate data all reject our condition although it is not rejected for long sub periods we show that our results for the uk suggest particular modifications to the strong form of the rational expectations hypothesis that our condition tests in fact these data are exactly consistent with a number of alternative hypotheses from this we argue that time series data are ill suited to parametric testing of any of the competing hypotheses on the inter temporal allocation of expenditure the pure theory of the inter temporal allocation of goods and time with perfect capital markets and perfect foresight is identical to the static demand case there is a single lifetime budget constraint and the allocation of expenditure to each period is made so that the marginal utility of discounted expenditure is the same in each period bewley 1977 and hall 1978 have identified the life cycle rational expectations hypothesis under uncertainty reh with the proposition that expected utility maximising consumers will allocate expenditures and time in such a way as to try and keep the marginal utility of discounted money constant given a set of time series on prices purchases wages and labor supply we can ask whether these realised plans are consistent with the life cycle hypothesis in this paper we propose a test that requires no ad hoc specification of functional forms or error processes but rather gives an answer yes or no based on finite mathematical techniques the specific hypothesis we test is a strong form of the reh viz that the marginal utility of discounted expenditure is constant over the period of observation for long time series this seems to be an absurdly strong hypothesis since it is effectively equivalent to assuming perfect capital markets and perfect foresight with regard to all important variables if however we can accept this strong hypothesis for a particular data set then any test of the weaker forms of the life cycle rational expectations hypothesis on this data set must be interpreted

interest rates aggregate information and monetary policy abstract interest rates set on economy wide markets represent an important source of information to economic agents within the class of business cycle models advanced by lucas and barro this paper explores the information conveyed by such aggregate signals and the types of monetary policies that can influence economic activity by changing the information content of interest rates

gender diversity in the boardroom and firm financial performance the monitoring role performed by the board of directors is an important corporate governance control mechanism especially in countries where external mechanisms are less well developed the gender composition of the board can affect the quality of this monitoring role and thus the financial performance of the firm this is part of the business case for female participation on boards though arguments may also be framed in terms of ethical considerations while the issue of board gender diversity has attracted growing research interest in recent years most empirical results are based on u s data this article adds to a growing number of non u s studies by investigating the link between the gender diversity of the board and firm financial performance in spain a country which historically has had minimal female participation in the workforce but which has now introduced legislation to improve equality of opportunities we investigate the topic using panel data analysis and find that gender diversity as measured by the percentage of women on the board and by the blau and shannon indices has a positive effect on firm value and that the opposite causal relationship is not significant our study suggests that investors in spain do not penalise firms which increase their female board membership and that greater gender diversity may generate economic gains

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

intervention in the mark dollar market the authorities reaction function abstract this paper investigates the intervention behavior of the deutsche bundesbank in the dollar dm market over the period 1974 to 1981 an intervention reaction model is developed which stresses the conditioning role of perceived exchange rate uncertainty the most important findings from non linear estimates are i an increase in perceived exchange rate risk shifts the bundesbank s trade off between money and exchange rate control in favor of the former aim probably due to risk aversion of the managers of the foreign department ii the bank tries to counter exchange speculation by compressing the expected risk premium and iii the bank does not completely sterilize

afriat s theorem and some extensions to choice under uncertainty the first part of the paper reviews the methodology developed by sydney afriat for determining whether a finite set of price and quantity data are consistent with utility maximizing behavior by a consumer some extensions of his basic model to models of consumer behavior where the structure of preferences is restricted in some way are also explained examples of special structures are homotheticity separability and quasilinearity of the utility function the second half of the paper is devoted to developing afriat type consistency tests for expected and nonexpected utility maximizing behavior

reputation in a model of monetary policy with incomplete information abstract previous models of rules versus discretion are extended to include uncertainty about the policymaker s type when people observe low inflation they raise the possibility that the policymaker is committed to low inflation type 1 this enhancement of reputation gives the uncommitted policymaker type 2 an incentive to masquerade as the committed type in the equilibrium the policymaker of type 1 delivers surprisingly low inflation with corresponding costs to the economy over an extended interval the type 2 person mimics this outcome for awhile but shifts eventually to high inflation this high inflation is surprising initially but subsequently becomes anticipated

optimally derived fixed rules and indicators abstract monetary targets have come to be regarded as inadequate for the conduct of short term monetary policy both among theoreticians and practitioners of policy in this paper two approaches are put forward analysed and evaluated for improving the performance of monetary targets according to the first approach simple rules for monetary targets are derived within an optimisation framework these rules related to ultimate targets are simple so that they can be announced and are flexible so that they are subject to revision when the economy drifts away from its course due to unexpected shocks the second approach is based on indicators and complements monetary targets with exchange rate targets through a simple feedback law for determining interest rate policy the advantage of this feedback law is that it provides the mechanism through which policy is to be revised in response to shocks if such a feedback law is announced private economic agents have the means of distinguishing discretionary and arbitrary changes of policy from those which are needed to bring the economy back to the announced and committed course this approach is used to analyse and extend the suggestions in the house of commons report on international monetary arrangements the common ground between the two approaches is an optimisation framework with respect to the parameters of either the fixed simple rules or the simple feedback laws this is discussed in section 1 the approach of deriving simple fixed rules is illustrated in a monetarist model in which there is a link between private sector expectations and the credible announcement of monetary targets the model is explained in section 2 and simple fixed rules are discussed in section 3 the performance of simple rules for monetary targets is evaluated in terms of a minimax strategy with model uncertainty between the monetarist model and a keynesian model without the assumption of announcement effects this is discussed in section 4 optimal feedback laws are derived and analysed in section 5 the parameter sensitivity of these feedback laws with respect to the model and the objective function as well as their behaviour under shocks is also examined

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

on optimality and time consistency when expectations are rational abstract this paper explores the implications of time inconsistency for optimal economic policy making it is found that if policy makers determine policy on the assumption that expectations are adaptive when in fact they are rational economic policy can be destabilising this adds support to reservations which kydland and prescott 1977 have raised about the appropriateness of standard optimal control methods a method is proposed which is a modification of standard optimal control techniques and which allows for the endogeneity of expectations when this method is used to determine policy there is no indication that policy is destabilising

board gender diversity and corporate response to sustainability initiatives evidence from the carbon disclosure project this paper investigates the effect of female representation on the board of directors on corporate response to stakeholders demands for increased public reporting about climate change related risks we rely on the carbon disclosure project as a sustainability initiative supported by institutional investors greenhouse gas emissions measurement and its disclosure to investors can be thought of as a first step toward addressing climate change issues and reducing the firm s carbon footprint based on a sample of publicly listed canadian firms over the period 2008 2014 we find that the likelihood of voluntary climate change disclosure increases with women percentage on boards we also find evidence that supports critical mass theory with regard to board gender diversity these findings reinforce initiatives being undertaken around the world to promote gender diversity in corporate governance while demonstrating board effectiveness in stakeholder management

approximating the asset pricing kernel this article tests a simple consumption based asset pricing model by approximating the true asset pricing kernel using low order orthonormal polynomials based on the model s state variables approximated kernels based solely on next period s consumption growth are not rejected by overall measures of model fit but they produce statistically and economically large pricing errors approximated kernels based on two quarters of future consumption growth and technology shocks have substantially improved overall fit in particular the best of these kernels are capable of eliminating the small firm effect a conventional approach to examining the implications of dynamic asset pricing models is to assume that markets are complete the economy is in equilibrium and that the unique state price deflator can be interpreted as the intertemporal marginal rate of substitution of a representative consumer given assumptions about the form of this unobservable utility function and on the observability of aggregate consumption the model can be tested by examining the conditional or unconditional covariation of estimated intertemporal marginal rates of substitution with measured asset returns the fact that this method of testing dynamic models requires strong assumptions is in and of itself not particularly troubling however the fact that these attempts have been almost uniformly inconsistent with the data on asset returns and consumption is problematic for example when the utility function is assumed to be time and state separable the absolute and relative levels of the real returns on risk free and risky securities see for example mehra and prescott 1985 and weil 1989 are inconsistent with the model s predictions the primary finding from a large literature testing consumption based models is that measured consumption is too smooth to rationalize the observed level and variability of asset returns for reasonable parameterizations of time separable utility functions an alternate approach pursued in this paper is to approximate the stateprice deflator or asset pricing kernel using orthonormal polynomials in a

does board gender diversity have a financial impact evidence using stock portfolio performance there is growing regulatory pressure on firms worldwide to address the under representation of women in senior positions regulators have taken a variety of approaches to the issue we investigate a jurisdiction that has issued recommendations and disclosure requirements rather than implementing quotas much of the rhetoric surrounding gender diversity centres on whether diversity has a financial impact in this paper we take an aggregate market level approach and compare the performance of portfolios of firms with gender diverse boards to those without we also investigate whether having multiple women on the board is linked to performance and if there is a within industry effect overall we do not find evidence of an association between diversity and performance we find some weak evidence of a negative correlation between having multiple women on the board and performance but that in some industries diversity is positively correlated with performance

nonlinear phillips curves mixing feedback rules and the distribution of inflation and output abstract optimal nominal interest rate rules are usually set assuming that the underlying world is linear in this paper we consider the performance of optimal rules when the underlying relationship between inflation and the output gap may be nonlinear in particular if the inflation output trade off exhibits nonlinearities this will impart a bias to inflation when a linear rule is used by deriving some analytical results for the higher moments and in particular the skewness of the distribution of output and inflation we show that the sign of the skewness of the distribution of inflation and output depends upon the nature of the nonlinearity for the convex modified hyperbolic function used by chadha et al imf staff papers 39 2 1992 395 and schaling bank of england working paper series 1999 inflation is positively and output negatively skewed whereas if a concave convex form is used the skewness of inflation and output is reversed to correct this bias we propose a piecewise linear rule which can be thought of as an approximation to the nonlinear rule of schaling 1999 in order to evaluate the relevance of these results we turn to some illustrative empirical results for the us and the uk we show that this reduces the bias but at the expense of an increase in the volatility of the nominal interest rate

does leaning against the wind improve exchange rate performance abstract this paper develops a model in which real disturbances cause the exchange rate to overshoot its new long run equilibrium level because of speculative risk aversion combined with the well known lagged effect of the exchange rate on trade flows in this context it is demonstrated that there exists an optimal degree of leaning against the wind which stabilizes the exchange rate at the new equilibrium but which requires the government to have accurate information about the exchange rate trade flow lag without this information leaning against the wind may increase the deviations of the exchange rate from its long run level

revealed preferences over risk and uncertainty ludovic renou would like to acknowledge financial support from the french national research agency anr under the grant cigne anr 15 ce38 0007 01

macroeconomic policy evaluation and optimal control theory a critical review of some recent developments abstract this survey addresses the recent literature on the application of optimal control theory and game theory to macroeconomic policy evaluation and design this literature focuses on strategic interactions between governments and private agents engaged in dynamic non cooperative games and emphasizes such issues as precommitment credibility and reputation as important and endemic aspects of optimal policy design a dominant theme is the problem of dynamic inconsistency and the inferiority of an equilibrium in single stage full information games without commitment this may be alleviated in repeated games involving reputation effects and threat strategies designed to coerce rivals into pursuing particular strategies and to sustain a sequential equilibrium the type and characteristics of a sequential equilibrium also depend importantly upon the information structure conditioning players beliefs under uncertainty included here are separating and pooling equilibria involving notions of learning signalling and information revelation additional dimensions exist in stochastic systems which introduce other forms of uncertainty optimal control and game theory have also been applied to international macroeconomic policy design with emphasis on the potential costs and benefits of non cooperative and cooperative behaviour between countries and problems of international policy coordination

the effects of women on corporate boards on firm value financial performance and ethical and social compliance the european commission has recently proposed the introduction of legally binding quotas for women on corporate boards of european companies this proposal has put the spotlight on the question of whether increasing female representation on the board brings economic benefits to the firm in order to shed light on the issue this study investigates the direct and indirect effects of women on the board on firm value we use a simultaneous equation model to estimate the effects of women on the board on firm value financial performance and compliance with ethical and social principles adopted by the firm we find no evidence that a higher female representation on the board directly affects firm s value however we find indirect effects women on the board are positively related with financial performance measured in terms of return on assets and return on sales and with ethical and social compliance which in turn are positively related with firm value the findings in this study suggest that greater female representation on corporate boards of large european firms can increase firm value indirectly further part of the indirect effect comes from stronger compliance with ethical principles something that is not captured by accounting based financial performance

the superiority of contingent rules over fixed rules in models with rational expectations the paper investigates the robustness of the proposition that in stochastic models contingent or feddback rules dominate fiped or openloop rules four arguments in favour of fixed rules are considere 1 the presence of an incompetent op malevolent policy maker 2 a trade off between flexibility and simplicity or credibility 3 the new classical proposition that only unanticipated stabilization policy has real effects 4 the time inconsistency of optimal plans in non causal models that is models in which the current state of the economy depends on expectations of future states the main conclusion is that the rational expectations revolution represented by arguments 3 and 4 does not affect the potential superiority of time inconsistent closed loop policies over time inconsistent open loop policies the case against conditionality in the design of policy must therefore rest on argument 1 or 2 which predate the new classical macroeconomics

a model of exchange rate dynamics this model treats the exchange rate as an asset price that depends on expectations concerning exogenous real and monetary factors that will affect relative prices and absolute price levels in future periods changes in exchange rates reflect both expected changes in these exogenous factors and changes in expectations occasioned by new information the model explains the random component in exchange rate behavior the source of divergences from purchasing power parity the anticipatory response of exchange rates to future expected disturbances and the causes of exchange rate overshooting

estimating time preferences from convex budgets experimentally elicited discount rates are frequently higher than what seems reasonable for economic decision making such high rates are often attributed to present biased discounting a well known bias of standard measurements is the assumption of linear consumption utility attempting to correct this bias using measures of risk aversion to identify concavity researchers find reasonable discounting but at the cost of exceptionally high utility function curvature we present a new methodology for identifying time preferences both discounting and curvature from simple allocation decisions we find reasonable levels of both discounting and curvature and surprisingly dynamically consistent time preferences jel c91 d12 d81 understanding and estimating time preferences is obviously of great importance to economists marketers and policy makers consumers decide how much to invest in savings education real estate and life insurance how much to diet exercise and smoke whether to marry when to have children and what to leave in their wills while there has been substantial research estimating time preferences using aggregate consumption data 1 the bulk of the effort has occurred in laboratory environments 2 among the many laboratory techniques employed recent studies have favored multiple price lists mpl with monetary payments 3 with mpls individuals are asked multiple times to choose between smaller payment amounts closer to the present and larger amounts further into the future the interest rate increases monotonically in a price list such that the point where an individual switches from preferring sooner payments to later payments carries interval

consume now or later time inconsistency collective choice and revealed preference this paper develops a revealed preference methodology for exploring whether time inconsistencies in household choice are the product of nonstationarities at the individual level or the result of individual heterogeneity and renegotiation within the collective unit an empirical application to household level microdata highlights that an explicit recognition of the collective nature of choice allows the vast majority of household behaviour to be rationalised by theory that assumes preference stationarity at the individual level for our particular short panel data set simply permitting limited intrahousehold heterogeneity in time preferences allows the choices of 98 4 of the sample to be rationalised by a model that assumes exponential discounting at the individual level we also find that couples characterized by lower divergence in spousal discount rates are older more likely to have children and wealthier which we take as indications of experiencing higher match quality

exchange rate policy and monetary information this paper develops a model of a small open economy in which the presence of local deviations from purchasing power parity give rise to differential information it is assumed that the monetary authorities are committed to buy and sell foreign exchange in order to support an exchange rate policy rule it is demonstrated that exchange rate policy can influence the distribution of real output i if agents possess incomplete and differential information and ii if they have contemporaneous money supply or balance of payments information it is also shown that exchange rate policy can be effective because of its ability to influence the information content of available monetary data the argument is turned around and used to support the frequent release of monetary data

backward and forward solutions for economies with rational expectations in models where anticipations of future endogenous variables influence current behavior there exists an infinity of solutions under the assumption of rational expectations this problem has been dealt with in the study of macro economic models by the implicit or explicit use of one of three additional requirements optimality consistency with alleged economic behavior or conformity of the endogenous variables to an imposed stationarity condition these requirements have coincided in existing models leading to the choice of a unique solution a forward solution the purpose of this paper is to review the problem characterize the solutions and examine whether these requirements are acceptable section i presents a simple model and derives the set of solutions the model makes no claim to generality but has the major advantage that the issues are easily understood in this simple case section ii discusses the requirement of consistency with economic behavior section iii discusses the requirement of stationarity and section iv provides some conclusions