optimal inflation tax under precommitment theory and evidence the authors develop and test the orthogonality conditions implied by a dynamic model of the inflation tax a distinguishing feature of the analysis is that the welfare loss from inflation the money demand function and the time path of inflation are jointly derived from first principles of government and private sector intertemporal optimization quarterly data for argentina brazil and israel are used in implementing the model although the overidentifying restrictions of the model are not rejected in most cases there are several data points characterized by higher rates of inflation than the optimal rates under precommitment copyright 1992 by american economic association

international marketing policy a discussion of the standardization construct and its relevance for corporate policy a fundamental question in international marketing concerns the desirability and feasibility of standardizing marketing programs and procedures internationally the primary objective of this paper is to present an overview and evaluation of the standardization debate central issues of interest include a discussion of the standardization construct and an evaluation of the evidence regarding corporate implementation of standardization strategies

50th anniversary article option pricing valuation models and applications this paper surveys the literature on option pricing from its origins to the present an extensive review of valuation methods for european and american style claims is provided applications to complex securities and numerical methods are surveyed emphasis is placed on recent trends and developments in methodology and modeling

private monitoring games and decisions under uncertainty abstract we investigate the value of delaying the punishment in private monitoring repeated games with almost public information when players use a grim trigger strategy if the effects of uncertainty and irreversibility are considered the equilibrium set would change

standardization preferences a function of national culture work interdependence and local embeddedness both theoretical and empirical studies of professional service employee standardization preferences are relatively scarce using responses from 398 employees of an international public relations firm this study finds that employees from high power distance high uncertainty avoidance and high context cultures prefer greater standardization whereas employees from high individualism cultures prefer less standardization additionally work interdependence is positively associated with standardization preferences whereas local embeddedness is negatively associated with standardization preferences

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

capital markets and the exchange rate with special reference to the dollarization debate in latin america the paper reviews the main challenges faced by policymakers in emerging market economies em in light of recent financial crises and taking into account salient factors like the existence of partial dollarization imperfect credibility weak financial systems and contagion the standard theory of optimal currency areas is discussed and criticized for omitting the above factors when these factors are taken into account an extreme foreign exchange regime like dollarization is shown to become much more attractive the paper discusses the pros and cons of dollarization and among other things shows that the lack of a lender of last resort is not necessarily a major drawback in em the paper also discusses inflation targeting it in a formal model it is shown that it could be subject to credibility problems similar to those found in exchange rate based stabilization programs

discretionary inflation in a general equilibrium model this paper extends the barro and gordon 1983 model to a general equilibrium framework in which the costs and benefits to surprise inflation reflect the preferences technology and market structure of the economy the benefit of such an approach is that we can relate the underlying features of the economy to the size of the inflation bias in particular it can be shown that an increase in the source of the monetary authority s incentive to inflate does not necessarily result in a worsened inflation bias due to offsetting changes in the cost of inflation furthermore changes in the real interest rate affect the monetary authority s incentives and hence the discretionary level of inflation lastly we can show that an increase in the labor share of national income worsens the inflation bias the model also indicates the importance of a nominal rigidity lack of policy precommitment and a distortion for optimal monetary policy to be characterized by a level of discretionary inflation that exceeds the friedman 1969 rule

do we really need to change the decision maker counterintuitive escalation of commitment results in real options contexts a robust finding in the escalation literature termed as the preference effect is that involvement in the period 1 initial project assessment decision increases the tendency for decision makers to stick with a losing course of action during the period 2 project reassessment decision the proposed solution is to bring in a new decision maker in period 2 across multiple studies we show that providing period 1 information in real options format increases the tendency for decision makers to view period 2 focal event information as both more negative and more important consequently such decision makers exhibit less escalation in period 2 i e exhibit behavior opposite to the preference effect this suggests that in real option contexts not only do we not need to bring in a new decision maker but also counterintuitively it is beneficial to retain the same decision maker in situations where escalation is likely to occur this paper was accepted by yuval rottenstreich judgment and decision making

assets and actions firm specific factors in the internationalization of u s internet firms by providing a nearly instant connection among parties at opposite corners of the world and enabling a variety of commercial exchanges the internet emerged as the technology expected to create a truly global market space internet firms faced the challenge of capitalizing on this development in this paper we examine what firm specific factors are associated with the propensity of pure u s based internet firms to enhance their international presence on the internet by developing country specific websites despite the assertion that all internet firms are born global our findings show that the pursuit of internationalization by internet firms is related to the levels of their intangible assets and strategic activity two types of intangible assets reputation and website traffic are positively related to the degree of internationalization so are the levels of competitive and cooperative activity and the interaction effects between reputation and competitive and cooperative activity these findings suggest that ideas from both resource based theory and research on competitive dynamics can contribute to understanding the internationalization of internet firms

influence of formalization on role stress organizational commitment and work alienation of salespersons a cross national comparative study organizations rely on formalization to coordinate the efforts of employees however this practice has been found to have a negative influence on role stress organizational commitment and work alienation of salespersons though the negative influence of formalization in the united states has been known for some time we still cannot predict if similar relationships would should be observed in other countries because the rationale developed to explain these relationships in the united states did not consider the cultural factors that influence them with such knowledge it would become possible to anticipate the nature of the relationship in different cultural environments such an approach to developing cross national models has been often suggested but seldom implemented by emphasizing the role of culture this study generates practical guidelines for both practitioners and theorists

tax base variability and procyclical fiscal policy in developing countries abstract based on a sample of 56 countries we show that fiscal policy in the g7 countries appears to be acyclical while fiscal policy in developing countries is procyclical i e fiscal policy is expansionary in good times and contractionary in bad times to explain this puzzle we develop an optimal fiscal policy model in which running budget surpluses is costly because they create pressures to increase public spending given this distortion a government that faces large fluctuations in the tax base as is the case for developing countries will find it optimal to run a procyclical fiscal policy

a cross national investigation of industrial salespeople s ethical perceptions this study examines ethical perceptions of industrial salespeople in the united states japan and south korea marketing ethics in general and selling ethics in particular have experienced increasing research attention many of the empirical studies have focused on ethical situations confronting marketing and sales practitioners despite the abundance of research in the general topic of marketing ethics as well as the globalization of competition in recent years a topic that has been virtually ignored is whether ethical perceptions of sales personnel are consistent across countries this paper reports a cross national comparison of business ethics of industrial salespeople across the three countries the findings indicate that nationality influences salespeople s beliefs about the ethics of selling practices and the need for company policies to guide those practices

cultural influences on managerial choice an empirical study of employee benefit plans in the united states the objective of this study is to determine the effect of culture on the provision of employee benefits cultural influences have been investigated from a variety of perspectives but not in the context of pension and welfare benefits using unique data this study analyzes the level of coverage of employee benefits in the united states results indicate that culture does have an effect on the provision of these benefits

converting technology to mitigate environmental damage there are many situations where policy makers would like to induce firms to make a major discrete conversion in production technology to help the environment this paper examines how heterogeneity in the operating condition of firms plant and equipment which cannot be observed by policy makers can affect the choice between incentives to encourage conversion to a cleaner technology by relating different conditions of firms plant and equipment to production costs extent of environmental damage and cost of conversion to a cleaner technology we show when a perfectly discriminating incentive to encourage conversion is not feasible in addition we show that firms with plant and equipment in better condition will convert their technology to mitigate their environmental damage and firms with plant and equipment in poorer condition will not this and a series of additional results lead to conditions under which an administratively simple uniform lump sum incentive to switch to cleaner technology is preferable to one based on output these results and conditions extend to cases where there are network externalities in conversion and where there is strategic timing in firms choice of when to convert

a model of advertising standardization in multinational corporations although there have been several studies concerning the issue of advertising standardization few authors have proposed an integrated model of the determinants of advertising standardization even if the extent of control of multinational corporations mnc over their subsidiaries is often cited as a key element in the determination of the level of advertising standardization adopted by the mncs there is no consistent view concerning the role of this variable this paper attempts to clarify these points by proposing at the mnc level a measurement model and a structural model for the determinants of the degree of advertising standardization in this model the mediation effect of the mnc s degree of control over the subsidiary is tested and validated in addition the measurement instruments used for the determinants are confirmed

product and promotion adaptation in export ventures an empirical investigation while the desirability of marketing adaptation vs standardization has long been debated within both academic and business circles empirical studies investigating the conditions under which each strategy becomes appropriate have been rare this article provides a formal investigation of the correlates of product and promotion adaptation in export ventures a conceptual framework of product and promotion adaptation in export ventures is proposed to integrate the diverse perspectives on the issue of standardization versus adaptation the conceptual framework is further specified in a testable form and tested via data collected by a series of in depth personal interviews with export marketing managers the results support the contingency perspective recently emerging in the standardization literature and suggest that the degree of the various aspects of product adaptation i e upon and after entry and promotion adaptation i e positioning packaging labeling and promotional approach are significantly influenced by company product industry and export market characteristics however the profile of the correlates varies across the various aspects of product and promotion adaptation

the optimal inflation tax when money reduces transactions costs abstract it has been argued that if money acts as an intermediate good the optimal inflation tax is zero this paper reexamines such a claim in the context of a model in which money reduces transactions costs it is shown that modeling money as an intermediate good does not necessarily imply that the optimal inflation tax is zero the optimality of a zero inflation tax depends on the properties of the transactions costs technology in particular if the transactions costs technology does not exhibit constant returns to scale it is optimal to resort to the inflation tax

choosing and reneging on exchange rate regimes we use data on announced and actual exchange rate arrangements to ask which countries follow de facto regimes different from their de iure ones that is do not do what they say our results suggest that countries with poor institutional quality have difficulty in maintaining pegging and abandon it often in contrast many countries with relatively good institutions display fear of floating that is they manage more than announced perhaps to signal their differences from those countries incapable of maintaining promises of monetary stability jel f3 o1

comparative marketing the first twenty five years this article reviews the field of comparative marketing in terms of scope types and depth of studies methodological issues conceptual and managerial payoffs and teaching approaches after its first quarter of a century as an international business topic comparative marketing is still relatively green

assessing the effects of culture on managerial attitudes a three culture test cross cultural studies are inherently difficult because the typical research design fails to differentiate cultural from other environmental influences the present study uses a research design that attempts to isolate the influence of culture japanese chinese and mexican managers their ethnic american counterparts and anglo americans are used to test the model results indicate unique persistent cultural characteristics with the cultural effect varying among the three groups of managers

the optimum quantity of money rule in the theory of public finance this paper examines optimal tax policy in a monetary economy in which money serves as an intermediate good that helps facilitate the conversion of scarce resources into tinal consumption goods by enabling consumers to economize on the costs of transacting it is shown that in such an environment even though distorting taxes must be levied for revenue purposes the optimal tax structure calls for abstaining from inflationary finance and adopting the optimum quantity of money rule

what if alexander hamilton had been argentinean a comparison of the early monetary experiences of argentina and the united states abstract the contrast between the early nineteenth century argentinean experience of high inflation and the american experience of low inflation is interpreted in terms of an optimal taxation model it is argued that the two countries experiences diverged because of the different constraints they faced in financing wartime government expenditures in the presence of frequent wars ever tightening access to foreign capital and an inadequate tax base argentina s use of the inflation tax may be viewed as an optimal solution to its wartime problems by contrast with the exception of the revolutionary war the absence of such constraints in the united states required full tax smoothing with only a temporary use of the inflation tax during wartime such policies were embodied in alexander hamilton s fiscal package of 1790 which allowed the united states to bond finance most subsequent wartime expenditures

the extraction of natural resources the role of thermodynamic efficiency abstract the modelling of production in microeconomics has been the subject of heated debate the controversial issues include the substitutability between production inputs the role of time and the economic consequences of irreversibility in the production process a case in point is the use of cobb douglas type production functions which completely ignore the physical process underlying the production of a good we examine these issues in the context of the production of a basic commodity such as copper or aluminium we model the extraction and the refinement of a valuable substance which is mixed with waste material in a way which is fully consistent with the physical constraints of the process the resulting analytical description of production unambiguously reveals that perfect substitutability between production inputs fails if a corrected thermodynamic approach is used we analyze the equilibrium pricing of a commodity extracted in an irreversible way we force consumers to purchase goods using energy as the means of payment and force the firm to account in terms of energy the resulting market provides the firm with a form of reversibility of its use of energy under an energy numeraire energy resources will naturally be used in a more parsimonious way

optimal inflation persistence ramsey taxation with capital and habits ramsey models of fiscal and monetary policy featuring time separable preferences and a fixed supply of capital predict highly volatile inflation with no serial correlation in this paper we show that an otherwise standard ramsey model that incorporates capital accumulation and habit persistence predicts highly persistent inflation the result depends on increases in either the ability to smooth consumption or the preference for doing so the effect operates through the fisher relationship a smoother profile of consumption implies a more persistent real interest rate which in turn implies persistent optimal inflation our work complements a recent strand of the ramsey literature based on models with nominal rigidities in these latter models inflation volatility is lower than in the baseline model but continues to exhibit little persistence we quantify the effects of habit and capital on inflation persistence and also relate our findings to recent work on optimal fiscal policy with incomplete markets

the impact of journals and authors on international business research a citational analysis of jibs articles in this paper we use citational analysis to examine the influence of individuals and disciplines on international business research we collected citational data over the ten year period 1984 to 1993 from every issue of the journal of international business studies we found that management economics marketing and finance disciplines have had significant influence on international business research and identified researchers such as dunning porter vernon casson rugman and hofstede as having made significant contributions to international business research

inflation and reputation with generic policy preferences this paper analyzes a reputational equilibrium for inflation under the generic assumption that monetary policy reflects proximate preferences for low expected inflation and positive unexpected inflation the paper stresses the qualitative implication that in a reputational equilibrium the policymaker behaves as if he is concerned about controlling inflation even though he does not have a direct preference for a low actual inflation rate the analysis also shows how the equilibrium inflation rate depends on a decision interval that reflects the underlying real objectives of monetary policy and that determines how fast private agents would react to opportunistic behavior by the policymaker copyright 1990 by ohio state university press

time consistency of fiscal and monetary policy a comment in an important recent contribution persson persson and svensson 1987 hereafter pps suggest that through careful restructuring of its nominal and real debt obligations a government may be able to induce future governments to follow the monetary and fiscal policies that it regards as optimal today the pps argument builds on lucas and stokey s 1983 demonstration that in a special nonmonetary setting the time inconsistency of optimal fiscal policy can be avoided through managing the term structure of real government obligations to the public the basic idea of the pps scheme for monetary economies is disarmingly intuitive in addition to continually restructuring nominal and real debt obligations a la lucas stokey each government must ensure that the next government inherits a stream of nominal claims on the public whose present discounted value equals the stock of money this equality pps argue removes the incentive for surprise inflation or deflation because such surprises would not affect the real net worth of the government this note shows that the pps prescription for avoiding time inconsistency appealing as it is is not generally sufficient even under the debt restructuring they recommend optimal policy is likely to be time inconsistent the main reason why their scheme fails is that the restrictions it imposes on government asset stocks satisfy first order but not second order conditions for an optimum because of the complex interactions between the current price level and future interest rates a government can raise its objective function by moving several variables at once away from the levels planned by the previous government even though price level changes alone would not affect government net worth we develop our argument using the model notation and equation numbers of pps to which the reader is referred for details the maximization problem associated with

seigniorage and the case for national money in countries with high rates of inflation there is typically movement away from the use of the local currency the paper analyzes the costs and benefits of using a local currency with emphasis on the seigniorage foregone by using a foreign money even if it should be desirable for a country to fix its exchange rate it still loses seigniorage if it does not use its own money the case for using a foreign money then turns largely on the superior discipline imposed on domestic policymakers by removing their control over the money supply alternative methods of imposing discipline are discussed estimates of the amount of seigniorage raised by different governments are presented seigniorage amounts in some cases to about 10 percent of government revenue estimates are also presented of both the annual flow and one time stock costs of giving up use of domestic currencies and instead using the dollar the flow cost is typically about 1 percent of gnp and the stock cost is around 10 percent of gnp

the impact of inflation on budgetary discipline abstract this paper views the budgetary process as a limited contingencies contract between the treasury and the ministers allowing a minister to ask for budget revisions upon costly verification by the treasury the minister may obtain extra funds for significant state verification costs and for low volatility the contract is non contingent for volatility significant enough the contract becomes state contingent it reduces the initial allocation and reduces the threshold associated with budgetary revisions in volatile economics the projected revenue understates the realized budget and the average budget error is positive the model s predictions are confirmed using data from latin america

ecology driven real options an investment framework for incorporating uncertainties in the context of the natural environment the role of uncertainty within an organization s environment features prominently in the business ethics and management literature but how corporate investment decisions should proceed in the face of uncertainties relating to the natural environment is less discussed from the perspective of ecological economics the salience of ecology induced issues challenges management to address new types of uncertainties these pertain to constraints within the natural environment as well as to institutional action aimed at conserving the natural environment we derive six areas of ecology induced uncertainties and propose ecology driven real options as a conceptual approach for systematically incorporating these uncertainties into strategic management we combine our results in an integrative investment framework and illustrate its application with the case of carbon constraints

national culture and corporate debt maturity abstract we investigate the influence of national culture on corporate debt maturity choice based on the framework of williamson we argue that culture located in social embeddedness level can shape contracting environments by serving as an informal constraint that affects human actors incentives and choices in market exchange we therefore expect national culture to be related to debt maturity structure after controlling for legal political financial and economic institutions using hofstede s four cultural dimensions uncertainty avoidance collectivism power distance and masculinity as proxies for culture and using a sample of 114 723 firm years from 40 countries over the 1991 2006 period we find robust evidence that firms located in countries with high uncertainty avoidance high collectivism high power distance and high masculinity tend to use more short term debt we interpret our results as consistent with the view that national culture helps explain cross country variations in the maturity structure of corporate debt

national culture and life insurance consumption this cross disciplinary study examines the way national culture affects consumption patterns of life insurance across countries life insurance is a service that is abstract complex and focused on unsure future benefits because of the uncertainty and ambiguity inherent in the life insurance product consumers are more likely to respond according to their cultural prescriptions our research hypotheses are tested empirically using hofstede s cultural dimensions and data from 1976 2001 across 41 countries the findings show that individualism indeed has a significant positive effect on life insurance consumption whereas power distance and masculinity femininity have significant negative effects the results are robust even after controlling for economic institutional and demographic determinants

decision support models for sustainable mining networks fundamentals and challenges abstract natural resource endowments have the potential of transforming the prospects of many developing economies however a nation s mineral resources can only generate prosperity if specific technology assets are employed in a way as to effectively develop its resource sector capture value from it and transform that value into long term benefits the roadmap to such an ambitious goal lies in effective management supported by consistent formal decision making methods yet integrating environmental and social goals into strategic tactical and operational decisions is a complex challenge often addressed without adequate analytical rigour we provide a systematic analysis of the literature devoted to the development and application of quantitative decision support methods with sustainability considerations in the mining industry by establishing a framework based on the fundamental elements inherent to decision making processes pertinent to mining operations we identify several opportunities for advancing research and practice in particular we find important gaps in elements such as project portfolio optimization operations and waste management and mine closure and rehabilitation and even more so when social targets and impacts are considered it is our belief that insights from this discussion could be of significant value to both academics and practitioners interested in promoting sustainable socio economic development throughout the mining industry

postconflict monetary reconstruction during civil wars governments typically resort to inflation to raise revenue a model of this phenomenon is presented estimated and applied to the choices and constraints faced during the post conflict period the results show that far from there being a fiscal peace dividend post conflict governments tend to face even more pressing needs after than during war as a result in the absence of post conflict aid inflation increases sharply frustrating a more general monetary recovery aid decisively transforms the path of monetary variables in the post conflict period enabling the economy to regain peacetime characteristics post conflict aid thus achieves a monetary reconstruction analogous to its more evident role in infrastructure

national culture and expatriate deployment we hypothesize that expatriate deployment is a control function predicted by home country culture dimensions with transaction cost and agency repercussions rather than culture in the aggregate this departure from the traditional conceptualization and measurement of cultural impact also yields a hypothesized asymmetrical effect which is tested for a multi country sample of 236 multinational subsidiaries using multiple measures of national culture hypotheses are supported with assertiveness and power distance confirmed as prime predictors of expatriate deployment

evaluating environmental investments a real options approach the paper presents a model that determines when at which output price level it is optimum for a firm to invest in environmental technologies and which are the main parameters that affect this decision our analysis shows that firms require high output price levels to be induced to invest in environmental technologies because they optimally would not want to commit to a heavy irreversible investment that could turn out to be unprofitable in the event of a price fall a comparative static analysis predicts that firms in industries with high output price volatility would be more reluctant to invest in environmental protection technologies and would be more willing to operate at low output levels thus attaining low emission levels increases in the interest rate would also reduce optimal environmental investment levels

an analysis of the stability and growth pact we use a stylised model to analyse the stability and growth pact for countries that have formed the european monetary union emu in our model shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully therefore while governments have no incentive to sign a stability pact in the absence of a monetary union they do so with monetary union to restrain this externality with uncertainty a monetary union combined with an appropriately designed pact will be strictly preferred to autonomy with differences in initial conditions conflicts of interest arise we study the nash bargaining solution

the learning curve and optimal production under uncertainty this article examines the implications of the learning curve in a world of uncertainty we consider a competitive firm whose costs decline with cumulative output because the price of the firm s output evolves stochastically future production and cumulative output are unknown and are contingent on future prices and costs we derive an optimal decision rule that maximizes the firm s market value produce when the price exceeds a critical level which is a declining function of cumulative output we show how the shadow value of cumulative production the total value of the firm and the decision to produce depend on the volatility of the price and other parameters uncertainty increases the critical price required for the firm to produce but also increases the value of thefirm thus during periods of high volatility firms facing a learning curve ought to be producing less but are worth more

valuation and management of fishing resources under price uncertainty the traditional expected net present value methods cannot properly capture the management flexibility and strategic value aspects of a fishery and may understate its value instead this paper develops a real options model to conceptualize and evaluate fishery exploitation flexibility specifically general models to value the opportunity to either exploit or invest in a fishery are presented they suffice to determine not only these values but also the optimal policy for opening closing delaying and setting its harvest rate the sustainable case in which the harvest rate equals the natural net growth function is also considered concerning the exploitation decision it is found that as could be expected the higher the resource price the higher the value of this opportunity in both models general and sustainable however the resource stock affects both models differently as to the investment opportunity its value is always lower than the exploitation opportunity because of investment costs finally numerical simulations are run in order to illustrate the nature of the solution sensitivity analysis concerning the influence of the tax rate convenience yield risk free interest rate and price volatility on the value of the fishery is also reported

the price of innovation an analysis of the marginal cost of green buildings abstract energy efficiency plays an important role in reducing the carbon externality from buildings but economic analyses of more efficient green building have thus far ignored input costs this paper finds that the average marginal cost of green labeled construction projects is smaller than the value premiums documented in the literature however design fees representing just a fraction of development costs but paid largely up front are significantly higher for green construction projects these projects also take longer to complete the results provide some insight into the market barriers and market failures that may explain the relatively slow adoption of otherwise economically rational green construction practices

sourcing strategies of european and japanese multinationals a comparison based on a typology of sourcing strategies this study identifies various sourcing patterns adopted by european and japanese multinational manufacturing firms in serving the u s market the study has found that the product s market performance is not at all related to its life cycle stage in world trade or to production location but is positively related to the internal components sourcing and negatively related to the product adaptation the findings strongly support levitt s call for a global product

time consistency of fiscal and monetary policy the problem of time inconsistency arises from two different sources first as shown by guillermo a calvo 1978 the re is an incentive for each government to engage in an initial unanti cipated inflation second as discussed by robert e lucas and nancy l stokey 1983 there is an incentive for each government to deviat e from the path of taxes announced by the preceding government in th is paper it is shown that these two sources of time inconsistency ca n be removed by a particular method of debt management involving bot h nominal and indexed government bonds of various maturities copyright 1987 by the econometric society

the cultural relativity of organizational practices and theories this paper summarizes the author s recently published findings about differences in people s work related values among 50 countries in view of these differences ethnocen tric management theories those based on the value system of one particular country have become untenable this concept is illustrated for the fields of leadership organization and motivation a key issue for organization science is the influence of national cultures on introduction management twenty or even 10 years ago the existence of a relationship be management and tween management and national cultures was far from obvious to many and it national cultures may not be obvious to everyone even now in the 1950s and 60s the dominant be lief at least in europe and the u s was that management was something univer sal there were principles of sound management which existed regardless of na tional environments if national or local practice deviated from these principles it was time to change local practice in the future the universality of sound manage ment practices would lead to societies becoming more and more alike this ap plied even to the poor countries of the third world which would become rich as well and would be managed just like the rich countries also the differences be tween management in the first and second world capitalist and socialist would disappear in fact under the surface they were thought to be a lot smaller than was officially recognized this way of thinking which dominated the 1950s and 60s is known as the convergence hypothesis during the 1970s the belief in the unavoidable convergence of management prac tices waned it was too obviously in conflict with the reality we saw around us at the same time supranational organizations like the european common market which were founded very much on the convergence belief had to recognize the stubbornness of national differences even within existing nations regional dif ferences became more rather than less accentuated the welsh the flemish the basques the bangladeshi the quebecois defended their own identity and this was difficult to reconcile with a management philosophy of convergence it slowly became clear that national and even regional cultures do matter for management the national and regional differences are not disappearing they are here to stay in fact these differences may become one of the most crucial problems for man agement in particular for the management of multinational multicultural orga nizations whether public or private

contingent deficit sanctions and moral hazard with a stability pact abstract we show how a stability pact based on deficit sanctions eliminates the exacerbation of debt accumulation that may arise from monetary unification moreover with sanctions contingent on the observed state of the economy the pact avoids aggravating the situation of a country in recession moral hazard problems arise if the state also depends on unobservable politically costly fiscal effort this could explain why sanctions under the actual stability and growth pact are only automatically waived in extreme recessions and why the procedure linking observed deficits and sanctions involves a long and detailed assessment of a country s situation

nominal versus indexed debt a quantitative horse race abstract the main arguments in favor and against nominal and indexed debts are the incentive to default through inflation versus hedging against unforeseen shocks we model and calibrate these arguments to assess their quantitative importance we use a dynamic equilibrium model with tax distortion government outlays uncertainty and contingent debt service our framework also recognizes that contingent debt can be associated with incentive problems and lack of commitment thus the benefits of unexpected inflation are tempered by higher interest rates we obtain that costs from inflation more than offset the benefits from reducing tax distortions we further discuss sustainability of nominal debt in developing volatile countries

personal selling elasticities a meta analysis abstract this article presents a meta analysis of prior econometric estimates of personal selling elasticity that is the ratio of the percentage change in an objective ratio scaled measure of sales output e g dollar or unit purchases to the corresponding percentage change in an objective ratio scaled measure of personal selling input e g dollar expenditures the authors conduct a meta analysis of 506 personal selling elasticity estimates drawn from analyses of 88 empirical data sets across 75 previous articles they find a mean estimate of current period personal selling elasticity of 34 they also find that elasticity estimates are higher for early life cycle stage offerings higher from studies set in europe than from those set in the united states and smaller in more recent years in addition elasticity estimates are affected significantly by analysts use of relative rather than absolute sales output measures by cross sectional rather than panel data by omission of promotions by lagge

a compound option model of production and intermediate inventories this article extends the option approach to valuing real assets by modeling the firm as a two stage process with bounded output rates in which the output of the first stage may be held as work in process in this setting the real asset becomes a compound option which if exercised gives the option to finish the work in process and sell the output as its final payoff the existence of intermediate inventories may arise as an optimal investment strategy for exploiting possible future price increases the framework allows us to analyze the effect of uncertainty on output rates and the effect of interest rates changes on inventory levels copyright 1993 by university of chicago press

sovereign debt portfolios bond risks and the credibility of monetary policy we document that governments whose local currency debt provides them with greater hedging benefits actually borrow more in foreign currency we introduce two features into a government s debt portfolio choice problem to explain this finding risk averse lenders and lack of monetary policy commitment a government without commitment chooses excessively countercyclical inflation ex post which leads risk averse lenders to require a risk premium ex ante this makes local currency debt too expensive from the government s perspective and thereby discourages the government from borrowing in its own currency

on the flexibility of monetary policy the case of the optimal inflation tax this paper examines optimal monetary policy under uncertainty in a context in which policy makers are able to make credible policy commitments we study an optimal taxation problem of minimizing the social cost of financing a stochastic and exogenous level of government transfers since in the basic model the welfare costs of inflation derive only from expected inflation the optimal monetary policy is highly responsive to the state of nature in a benchmark case in which all shocks are transitory the optimal policy calls for loading all the variability of government transfers on the shoulders of the inflation tax

national culture and the choice of exchange rate regime abstract based on the social analysis framework of williamson we argue that national culture especially the individualism collectivism dimension located in the social embeddedness level can guide behaviors and decisions in a country including the choice of exchange rate regime we argue that individualistic societies are more likely to choose floating regimes because their economic agents are independent overconfident and have higher levels of risk tolerance individualistic societies are also associated with better financial development fewer capital controls and more democratic institutions which are all tied to a higher probability of choosing a floating exchange rate regime we use data on 78 countries over the 1976 2014 period and we control for common determinants of exchange rate regimes we find that individualistic countries have a significantly higher probability of implementing a floating regime than a fixed regime our evidence is robust to using an instrumental variables approach an alternative estimation technique an alternative regime classification alternative proxies for culture a subsample analysis and additional controls we also find that other cultural dimensions uncertainty avoidance power distance and masculinity can influence the choice of exchange rate regime but their effect is weaker than that of individualism

an investigation of gender differences in leadership across four countries this study investigates the emphasis males and females place on leadership behaviors and styles across four countries characterized as two cultural dyads norway sweden and australia u s previous gender comparisons and cross cultural studies of leadership are reviewed a framework for exploring leadership consisting of five leadership behaviors and six leadership styles is then presented and tested with questionnaire data from 209 managers across the four countries results demonstrate significant effects for gender and country but no interaction effects post hoc analyses suggest that across all four countries male emphasize the goal setting dimension while females emphasize the interaction facilitation dimension australians scored significantly differently than leaders in the other countries on interaction facilitation benevolent autocratic style and laissez faire style these findings are discussed in light of gender characteristics and cultural values

influence of role stress on industrial salespeople s work outcomes in the united states japan and korea role theory espouses and extensive empirical research has found that role stress can have deleterious effect on work outcomes of sales personnel the findings of these investigations however are predicated on u s based samples of salespeople whether similar results would be obtained with samples of salespersons in other countries has not yet been determined this paper reports the results of a study that examined the impact of role stress on performance job satisfaction and organizational commitment of industrial salespeople from the united states japan and korea tests of cross national hypotheses indicate general consistency in the findings across the three countries

investments in flexible production capacity abstract we examine the technology and capacity choice problem of a multi output firm facing stochastic demands in a continuous time framework the firm can install output specific capital or at greater cost flexible capital that can be used to produce different outputs investment is irreversible the firm must choose a technology and decide how much capital to install knowing it can add more later as demand evolves we formulate the capacity choice problem as a singular stochastic control problem show that the value of the firm equals the value of its installed capital plus the value of its options to add capacity in the future and derive an optimal investment rule that maximizes the firm s market value we also address the analogous problem for a multi input firm that faces stochastically evolving factor costs and can install input specific or flexible capital

environmentally sustainable innovation expected attributes in the purchase of green products in a capitalist economy the principles values and behaviors of a great part of the population are centered on buying things on having goods thus in order to achieve sustainable development emphasis should be given to the creation and the promotion of environmentally sustainable products in view of that the present study investigates consumers purchase decision process regarding environmentally sustainable products this study sought identifying what the green product and process expected attributes are in automobile and furniture purchases as well as what the expanded and reduced risks are in offers with these characteristics to reach these objectives a qualitative research was initially performed and subsequently a quantitative research was carried out with the aim to confirm the mapped data in summary the results obtained indicate as important green attributes for automobiles items such as economy engine and new technologies regarding furniture important green attributes design origin label and origin of the raw material were indicated as important furthermore it could be verified that the purchase of green products may increase performance and time risks and mitigate financial and social risks in short this study allowed for advances in the theoretical comprehension regarding green products and decision making processes with medium and high involvement levels however once external factors such as culture and ethnicity tend to influence buyers decision making processes and considering the fact that this study was executed in brazil distinct results may be found in other countries

inflation in open economies abstract this paper relates the time consistent inflation rate to the degree of trade openness of an economy the mechanism linking the welfare effects of monetary surprises and hence the incentives to inflate to openness does not rely on a large country terms of trade effect but rather is due to imperfect competition and nominal price rigidity in the non traded sector the empirical evidence supports the main predictions of the model 1997 elsevier science b v

optimal fiscal and monetary policy under sticky prices this paper studies optimal fiscal and monetary policy under sticky product prices the theoretical framework is a stochastic production economy without capital the government finances an exogenous stream of purchases by levying distortionary income taxes printing money and issuing one period nominally risk free bonds the main findings of the paper are first for a miniscule degree of price stickiness i e many times below available empirical estimates the optimal volatility of inflation is near zero this result stands in stark contrast with the high volatility of inflation implied by the ramsey allocation when prices are flexible the finding is in line with a recent body of work on optimal monetary policy under nominal rigidities that ignores the role of optimal fiscal policy second even small deviations from full price flexibility induce near random walk behavior in government debt and tax rates third sluggish price adjustment raises the average nominal interest rate above the one called for by the friedman rule finally an interest rate feedback rule whereby the nominal interest rate depends on inflation and output fits well the data emanating from the ramsey economy however the fitted rule is not of the taylor type for the implied inflation coefficient is less than one and close to zero and the output coefficient is negative jel classification e52 e61 e63

the effect of decisions under uncertainty on imperfect monitoring games abstract the study of repeated games with imperfect public information began with abreu d pearce d stacchetti e 1986 optimal cartel equilibria with imperfect monitoring journal of economic theory 39 251 269 using dynamic decomposition and was settled in fudenberg d levine d maskin e 1994 the folk theorem with imperfect public information econometrica 62 997 1039 however we suggest that if the effect of uncertainty and irreversibility are considered when punishment is exercised the set of perfect public equilibria and their payoffs would change

the use of real options approach in energy sector investments abstract energy shortage global warming and climate change led to an increase in the use of alternative sources of energy with renewable energy sources res playing a fundamental role in this new energetic paradigm however the investment costs often constitute a major barrier to their spread use moreover the overall benefits of renewable energy technologies are often not well understood and consequently they are often evaluated to be not as cost effective as traditional technologies from the moment that the energy sector started a deregulation process with a high level of competitiveness and associated increased market uncertainty traditional project evaluation techniques alone became insufficient to properly deal with these additional risk and uncertainty factors the diffusion of the renewable energy technologies is also affected by this feature the way investors evaluate their investments call now for the use of more sophisticated evaluation techniques real options approach can deal with these issues and as so began to be considered and applied for the energy sector decision aid this approach it is now extensively widespread in evaluating investment projects in the energy sector a large set of applications in almost all fields of energy decision making from electricity generation technologies appraisal to policy evaluation is available in the literature however the use of this technique in the field of res is still limited and worth to be analysed this paper addresses this issue a review of the current state of the art in the application of real options approach to investments in non renewable energy sources and res is presented giving perspectives for further research in this field

time to build option value and investment decisions abstract investment decisions and outlays are often made sequentially for example the rate at which construction proceeds is usually flexible and can be adjusted with the arrival of new information traditional discounted cash flow methods which treat the pattern of investment as fixed ignore this flexibility and understate the value of the project this paper uses contingent claims analysis to derive optimal decision rules and to value such investments we determine the effects of time to build opportunity cost and uncertainty on the investment decision for reasonable parameter values we show how a simple npv rule can lead to gross errors

is now a good time for iowa to invest in cellulosic biofuels a real options approach considering construction lead times abstract the revised renewable fuel standard of the u s mandates a production of 16 billion gallons per year by 2022 from cellulosic biofuels iowa rich in agricultural residues like corn stover is a major player in contributing to the fulfillment of the cellulosic biofuels mandate is it a good time for iowa to start investing in cellulosic biofuels using a fast pyrolysis facility as an example we present a real options approach for valuing the investment of a new technology for producing cellulosic biofuels subject to construction lead times and uncertain fuel price we conduct a case study on iowa in which the decision maker finds the optimal investment time for the fast pyrolysis facility subject to production and distribution constraints our result indicates that the project is profitable if the facility is invested now but could be more profitable if invested later namely now it is not the optimal time for iowa to start constructing the fast pyrolysis facility we also find that the impact of the lead time on the project value is too significant to overlook the profitability of the project is sensitive to the outlook of fuel price if the future retail fuel price drops just 7 lower than forecasted by the energy information administration the investment may not be profitable the impact of the technology improvement production yield and biomass feedstock price is also analyzed using regression

a comparison of nominal and indexed debt under fiscal constraints this paper makes a welfare comparison between the issuance of price indexed and nominal public debt in the presence of fiscal constraints viz a debt constraint a deficit constraint and a combination of both distortionary taxes or public consumption are regulated to avoid the violation of the relevant fiscal constraint s under a debt constraint indexed debt is generally preferred while under a deficit constraint the results are more mixed introducing inflation persistence and raising the maturity of the debt tend to increase the magnitude of the welfare differences between the two types of debt welfare differences are further affected by the degree to which public consumption and tax revenues are indexed to actual versus structural nominal gdp