host country national networks and expatriate effectiveness a mixed methods study this paper integrates research on personality dissonance and social networks to explore how expatriate interactions with host country nationals hcns are associated with expatriate effectiveness a mixed methods study with expatriates working in china reveals that extraversion is positively related to overall performance a paradox is also noted whereas higher network ties with hcn colleagues are positively associated with performance they are negatively associated with adjustment interviews extend the survey results and highlight how the unclear boundaries between work and home impact on hcn network relationships

work and family role adjustment of different types of global professionals scale development and validation although the original model of expatriate adjustment proposed by black and colleagues has received substantial empirical support it has come under increased academic scrutiny due to both the conceptual overlap among its dimensions and its limited applicability for global professionals who interact with individuals from diverse cultures drawing on role theory we conceptualize and develop a multidimensional scale of the work and family role adjustment of global professionals we assess this scale through five interlocking studies using data from a total of 1231 corporate and self initiated expatriates international business travelers and global domestics after confirming the scale s dimensionality we provide evidence for convergent discriminant nomological and predictive validity we also demonstrate differences in levels of adjustment and in relationships between work and family demands and resources and their respective forms of adjustment across various types of global professionals we contribute to international business research and the organizational behavior and work family literatures by offering a theoretically based scale that assesses adjustment to both work and family roles for a wide range of global employees our scale further lends itself as a diagnostic tool during the selection training and support of global professionals and their families

real capital market integration in the eu how far has it gone what will the effect of the euro be real capital market integration how far has integration gone what euro effect much effort has been devoted to the study of financial market integration in europe little is known however about real capital market integration the degree to which plants and equipment move to take advantage of locally high returns this paper looks at the evidence an analysis of flows of foreign direct investment in europe shows that integration was quite limited in the early 1980s but has increased considerably since then another analysis looks at rates of return of a large number of firms it reveals that country specific factors play a significant role in explaining corporate returns even after taking risk into account this finding is incompatible with the capm definition of market integration the view that integration is limited in europe is further strengthened when the same approach is carried out for the usa and canada part of the national specificity appears to be related to labour and goods market regulations which harm firms profitability if by introducing more transparency and eliminating currency risk emu strengthens competition on the real capital market one obvious economic benefit will be a more rational and efficient use of capital but the most important potential consequences are political special interest regulations of an exclusively national nature will not survive they will either fall in a wave of internationalist liberalization or become embedded in harmonized regulations at the federal level a reduction in excessive regulatory burdens notably in the labour market could lead to substantial and shared productivity gains georges de menil

career management issues facing expatriates this research explores expatriate assignments from a career development perspective first the article examines the impact of five organization level career development programs and policies on expatriate effectiveness then it explores the impact of five individual level career management strategies on the success of expatriate transitions data from 118 expatriates in saudi arabia europe south america and japan are presented to examine these career development issues

rules for a lender of last resort an historical perspective abstract the federal reserve was established in 1913 to be a lender of last resort paul warburg its principal architect had in mind that a u s central bank would follow bagehot s strictures to lend freely at a penalty rate in the face of a scramble for high powered money yet the federal reserve act never spelled out how the fed was supposed to act as an llr this omission came to the fore in the great contraction 1929 to 1933 when the fed failed to prevent four banking panics which turned a serious recession into the great contraction reforms in the 1930s corrected some of the fed s failures but clamped down on financial activity for 40 years the financial crisis problem returned in the 1970s with financial liberalization the fed abandoned bagehot s strictures and adopted the too big to fail doctrine and creative ambiguity this policy shift contributed to moral hazard and created new threats to financial stability with the rise of the shadow banking system the subprime mortgage crisis prompted the fed to take unprecedented llr activities which have opened up a pandora s box of perils the fed has moved away from rules based policy in its llr function

expatriate assignment adjustment and effectiveness an empirical examination of the big picture this study extends the international literature by empirically testing a model of expatriate adjustment that examines the relationships between organizational antecedents i e reasons for assignment a more comprehensive set of adjustment behaviors self reported performance and subordinate rated managerial effectiveness using data from 194 expatriate managers and 505 subordinates working in the multinational hotel industry structural equations modeling results supported the hypothesized model the conceptual and empirical contributions of this study as well as the managerial implications are discussed

too big to fail before the fed too big to fail is consistent with policies followed by private bank clearing houses during financial crises in the u s national banking era prior to the existence of the federal reserve system private bank clearing houses provided emergency lending to member banks during financial crises this behavior strongly suggests that too big to fail is not the problem causing modern crises rather it is a reasonable response to the threat posed to large banks by the vulnerability of short term debt to runs

the joint production of confidence endogenous regulation and nineteenth century commercial bank clearinghouses during the nineteenth century deposits increased relative to bank notes c ausing increased information asymmetry problems in banking this pape r describes how bank clearinghouses lowered these costs by monitoring bank activities and establishing mechanisms of managerial control i n effect regulating bank behavior such actions enforced the loca l one to one exchange rate between deposits and specie clearinghouse s increased regulation during financial panics creating and enforcin g a risk sharing device loan certificates for addressing panic rela ted information problems this paper concludes that the market s capacity to control bank managers depends on the banking product mix and more generally on information costs copyright 1987 by ohio state university press

private fiat money with many suppliers a dynamic rational expectations model of money is used to investigate whether a nash equilibrium of many firms each supplying its own brand name currency will optimally deflate their currencies in friedman s 1969 sense the optimal deflation does arise under an open loop dynamic structure but the equilibrium breaks down under a more realistic feedback control structure

exchange rate regimes and fdi in developing countries a propensity score matching approach abstract theory suggests that regimes of relatively fixed exchange rates encourage inward foreign direct investment fdi relative to regimes of more flexible exchange rates we use propensity score matching psm to investigate the relationship between the exchange rate regimes of 70 developing countries and fdi into such countries using de facto regime classifications we include a large number of variables in the logit equation that estimates the propensity score the probability of regime choice we also use general to specific modeling to get alternative parsimonious versions based on four matching procedures the average treatment effects suggest with overall modest statistical significance that relatively fixed de facto regimes do encourage fdi compared with relatively floating regimes in addition the estimated effects are sometimes economically large

the impact of milton friedman on modern monetary economics setting the record straight on paul krugman s who was milton friedman abstract paul krugman s essay who was milton friedman seriously mischaracterizes friedman s economics and his legacy in this paper we provide a rejoinder to krugman on these issues in the course of setting the record straight we provide a self contained guide to milton friedman s impact on modern monetary economics and on today s central banks we also refute the conclusions that krugman draws about monetary policy from the experiences of the united states in the 1930s and of japan in the 1990s

in which context is the option clause desirable the option clause is a contractual device from free banking experiences meant to prevent banknote redemption duels it has been used within the diamond and dybvig j pol econ 91 401 419 1983 framework to suggest that very simple contractual solutions can act as an alternative to deposit insurance this literature has however been ambiguous on whether the option clause can replace deposit insurance outside of those two contexts it will be argued that the theoretical clause does not generally affect the likelihood that a solvent bank goes bankrupt because of a bank run as empirical evidence suggests it is already near null and that the exercise of the clause will have the effect of diminishing the size of creditor claims on bank assets because it exacerbates the agency problem of bank debt it will therefore be argued that the clause is only desirable in a free banking systems that are historically devoid of bank runs in the first place and have other means of managing debt related agency problems and b under the unrealistic assumption that bank runs are self fulfilling prophecies it will be argued that the agency problem of bank debt makes the option clause undesirable outside of free banking systems

fractional reserve banking in grain fractional reserve banks namely enterprises being legally liable to pay some substance on demand while regularly having too little on hand to satisfy all their obligations are commonly associated exclusively with money conceivably fractional reserve banks can deal in substances other than money as it happens chicago s warehousemen of the 1860s practiced fractional reserve banking not in dollars or sterling but in grain l these warehousemen operated in the style of a conventional financial intermediary borrowing short through demand deposits in order to lend long the natural evolution of fractional reserve banking in grain in nineteenth century chicago was interrupted however ever more stringent laws the result of repeated campaigns against fraudulent receipts eventually forced chicago s warehousemen to keep 100 percent reserves consequently the organization of the grain trade past and present not only provides information about the development of fractional reserve banking in general but reveals the effects of a rare experiment in outlawing fractional reserve banking

money is an experience good competition and trust in the private provision of money the interplay between competition and trust as efficiency enhancing mechanisms in the private provision of money is studied with commitment trust is automatically achieved and competition ensures efficiency without commitment competition plays no role trust does play a role but requires a bound on efficiency stationary inflation must be non negative and therefore the friedman rule cannot be achieved the quality of money can be observed only after its purchasing capacity is realized in this sense money is an experience good

organizational predictors of expatriate job satisfaction the study presented here attempted to identify the factors under the control of the organization that may predict expatriate job satisfaction the results indicate that both job task and organization characteristics are significantly related to both intrinsic and extrinsic job satisfaction the results appear to have both managerial and research implications

the u curve adjustment hypothesis revisited a review and theoretical framework the cross cultural adjustment research literature has largely been conducted from an atheoretical perspective when a theoretical framework is imposed the u curve adjustment theory has been the one most commonly used the lack of a comprehensive review of the empirical literature on the u curve adjustment theory has allowed scholars to accept or dismiss the theory on grounds other than that of empirical evidence this paper reviews the empirical literature and proposes a theoretical framework and research agenda for future research on cross cultural adjustment

a needs driven approach to expatriate adjustment and career development a multiple mentoring perspective although effective in improving socialization development and retention in the us domestic context mentoring would likely benefit expatriates and their firms but it remains theoretically underdeveloped in the international context we develop a theory of international mentoring by integrating current perspectives on protean and boundaryless careers with the literature on mentoring and expatriates expatriates need multiple mentors to assist their adjustment and development during the pre departure expatriation and repatriation stages of international assignments we discuss both hierarchical and peer and formal and informal mentoring relationships to delineate which relationships best address specific expatriate needs international mentoring may improve expatriate adjustment development and retention and thus may affect outcomes of international strategy we conclude by discussing implications and avenues for future research

the evolution of a free banking system the institutional features of models of unregulated monetary systems have often been arbitrarily and implausibly assumed this paper instead provides realistic grounding for important features by constructing a logical evolutionary account of free banking sophisticated and orderly arrangements are shown to emerge from competition and the pursuit of less costly methods of payment the emergence of standardized commodity money is followed by the development in turn of basic money transfer banking easily transferable bank liubilities and clearinghouses the features of an evolved free banking system differ from those assumed in recent models of competitive payments systems

work role transitions a study of american expatriate managers in japan throughout the course of a career an individual must make numerous role transitions instigated through such events as overseas transfers domestic transfers promotions company reorganizations and inter company job changes this paper examines the relationships between several variables and work role transition in the case of an overseas assignment to japan role ambiguity and role discretion were found to influence work adjustment while predeparture knowledge association with local nationals and family s adjustment were found to correlate with general adjustment of american expatriate managers in japan

sources of panics evidence from the weekly data abstract we use weekly data 1867 1933 to investigate the sources of banking and financial panics we find that while a panic s exact starting date is unpredictable one can identify environments conducive to panics a lack of liquidity in financial markets seems to be a key source results also reveal the effectiveness of the aldrich vreeland act inelastizing the money supply and shortening the panic of 1914 and suggest that the panic of 1933 may have been caused by a speculative attack on the gold backed us dollar via the banks as opposed to a run on the banks directly

scale economies in banking a restructuring and reassessment the issue of scale economies in banking has a rich history most earlier studies report modest operating cost scale economies for small institutions those with less than about 50 million of deposits in 1968 dollars but are unclear where these economies might end if at all unfortunately these studies are limited in four important respects first those that were well specified did not measure the total cost of banking operations but concentrated on estimating scale economies for individual banking functions e g demand deposits separately from commercial loans second an average cost curve that could take a u shape over the full range of banks was not fitted either because larger banks were not included or because of the functional form used cobb douglas consequently the optimum or minimum cost size of a bank or office could not be determined third the variables measuring the costs of branching were misspecified fourth the branch

existence and stability of conventions and institutions in a monetary economy the example of money illustrates that the role of history is crucial in explaining the emergence and persistence of conventions and institutions this implies that in analyzing money and monetary institutions the usefulness of the general equilibrium analysis and game theory which both draw upon an instrumental concept of rationality is limited in our view a fruitful analysis of conventions and institutions has to take account of the importance of historical contingencies and the fundamental incompleteness of individual knowledge

competitive currencies legal restrictions and the origins of the fed some evidence from the panic of 1907 in the last several years economists have produced numerous studies examining both the theoretical operations and historical manifestations of unregulated banking systems recent examples of historical investigations are the studies by l white 47 who explores the scottish experience selgin 33 on china and timberlake 43 gorton 12 and mullineaux 20 all of whom examine the role of clearinghouses prior to the creation of the federal reserve system in the united states timberlake and gorton emphasize the role that currency substitutes played during banking panics of that era the present paper seeks to explore the issuing of currency substitutes during the fall of 1907 in greater detail in particular it seeks to explain precisely why currency substitutes were needed and how they became accepted and to examine the implications of the panic for both traditional and present arguments over the historical justifications for the fed

competitive banking bankers clubs and bank regulation this paper reexamines the view that banking regulation and central banking arose to counter market failures it investigates the factors that led bankers to form clubs and examines the regulations imposed by clubs on their members it suggests that such regulation is different from real world regulation and central banking and would be unlikely to arise spontaneously from free banking anyway it also suggests that this view is consistent with available evidence and compares it with the alternative views of gary gorton and donald j mullineaux 1987 and of charles a e goodhart copyright 1994 by ohio state university press

dimensions determinants and differences in the expatriate adjustment process we comprehensively test the black mendenhall and oddou 1991 model of the dimensions and determinants of adjustment to international assignments we also expand the model to examine two individual factors i e previous assignments and language fluency and three positional factors i e hierarchical level functional area and assignment vector as moderators of adjustment determinants surveys were completed by 452 expatriates from 29 different countries assigned to 45 host countries by large multinational firms the multi dimensionality of adjustment was investigated and confirmed support for the expanded black et al 1991 model was found several significant moderating effects emerged showing different patterns of adjustment for those with different amounts of previous expatriate experience and levels of host country language fluency hierarchical level and assignment vector were also important moderators but the effects for functional area were generally weak

unemployment dynamics with international capital mobility abstract we study the response of domestic unemployment rates to shocks in total factor productivity for economies with high capital mobility and low labour mobility we show that high capital mobility amplifies the impact on the domestic unemployment rate of domestic fluctuations in total factor productivity shortens the lag of the response to shocks and raises the variability of unemployment but average unemployment is unaffected capital flows increase the riskiness of labour income and reduce the riskiness of capital income but do not reduce mean welfare

can we improve the structure of financial systems 1993 the main theme of this paper is that several of the characteristics of our present western monetary and banking systems have been crucially dependent on the particular temporal process of historical development and are not an essential feature of more fundamental preferences or technological conditions they exist in part because we take them for granted it is the purpose of this paper to examine what might change in both theory and practice if some of these inessential characteristics were to be changed

the anatomy of government failure government failure is a much bigger problem than its contemporary treatment implies setting aside natural disasters most of the great catastrophes of human history have been government failures of one sort or another we argue that many so called market failures are government failures because government defines the institutions in which markets succeed or fail the concept of government failure has been trapped in the cocoon of the theory of perfect markets narrowly defined deviations from market perfection have been designated market failures for which government corrections may or may not really be a solution government failure in the contemporary context means failing to resolve a classic market failure we propose an alternative approach for evaluating whether government fails the pareto standard if an available pareto improvement is not chosen or is not implemented that is a government failure we organize government failure into two types substantive and procedural substantive failures include the inability or unwillingness to maintain order to maintain sound fiscal and monetary policies and to reduce risks of transaction costs which we classify as corruption agency and rent seeking procedural failures are inadequacies of available social choice mechanisms causing collective decisions to be arbitrary capricious or manipuated we conclude with some reflections on human rationality and the implications of behavioral economics

accounting for non interest bearing currency a critique of the legal restrictions theory of money the legal restrictions theory of money developed by neil wallace and others implies that all noncommodity currency would be interest bear ing under laissez faire if the interest rate on bonds is positive this note cites historical evidence to the contrary it then analyzes the source of the legal restrictions theory s inapplicability and o ffers an alternative computation cost based explanation for nonintere st bearing currency copyright 1987 by ohio state university press

liquidity risk bank networks and the value of joining the federal reserve system reducing systemic liquidity risk related to seasonal swings in loan demand was one reason for the founding of the federal reserve system existing evidence on the post federal reserve increase in the seasonal volatility of aggregate lending and the decrease in seasonal interest rate swings suggests that it succeeded in that mission nevertheless less than 8 percent of state chartered banks joined the federal reserve in its first decade some have speculated that nonmembers could avoid higher costs of the federal reserve s reserve requirements while still obtaining access indirectly to the federal reserve discount window through contacts with federal reserve members we find that individual bank attributes related to the extent of banks ability to mitigate seasonal loan demand variation predict banks decisions to join the federal reserve consistent with the notion that banks could obtain indirect access to the discount window through interbank transfers we find that a bank s position within the interbank network as a user or provider of liquidity predicts the timing of its entry into the federal reserve system and the effect of federal reserve membership on its lending behavior we also find that indirect access to the federal reserve was not as good as direct access federal reserve member banks saw a greater increase in lending than nonmember banks

money as meta rule buchanan s constitutional economics as a foundation for monetary stability this paper explores james buchanan s contributions to monetary economics and argues these contributions form the foundation of a robust monetary economics paradigm while often not recognized for his contributions to monetary economics buchanan s scholarship offers important insights for current debates especially the renewed interest in narrow banking in the wake of the financial crisis we argue that the post 2007 crisis milieu creates a unique opportunity to recognize as buchanan did the vital role that money plays in the market as the grammar of commerce that recognition makes the need for more fundamental reform of our monetary regimes at the constitutional level more apparent making buchanan s work on monetary constitutions more relevant than ever before we then discuss how adopting buchanan s monetary framework can improve both monetary scholarship and institutions

bank panics and the endogeneity of central banking abstract central banking is intimately related to liquidity provision to banks during times of crisis the lender of last resort function this activity arose endogenously in certain banking systems depositors lack full information about the value of bank assets so that during macroeconomic downturns they monitor their banks by withdrawing in a banking panic the likelihood of panics depends on the industrial organization of the banking system banking systems with well diversified big banks are less prone to inefficient bank runs because diversification alleviates the information asymmetry in addition big banks can self monitor through publicly observable branch closure systems of many small banks form incentive compatible bank coalitions to emulate the big banks during times of crisis such coalitions improve efficiency by monitoring member banks and issuing money that is a kind of deposit insurance a precursor of central banking

laissez faire monetary theorists in late nineteenth century america economists have recently begun to reconsider many forms of regulation of money and banks from what may be termed a laissez faire perspective some have questioned fundamentally the rationale for any government role this development raises an interesting question for historians of thought what intellectual support did the concept of a free market monetary system receive in the 19th century the heyday of classical liberalism and laissez faire thought this paper takes up the question by critically surveying american monetary writings from the last half of the 19th century 2 we find that the idea of a laissez faire monetary policy was never very popular in the united states though it did have proponents whose work was often insightful most of the relevant literature was written in response to consequences wrought by the monetary legislation of the civil war that legislation included not only the national bank acts 1863 4 but also an ancillary measure effective 1866 placing a prohibitive tax on state bank notes these laws forced banks of issue to become national banks and thus to buy federal bonds as collateral for their notes which had the intended effect of creating an extra demand for the federal government s wartime debt in addition congress authorized the issue of legal tender greenback currency by the treasury a frequent theme in the post bellum monetary literature was the alleged deficiency or inelasticity of the currency supply some the greenbackers and silverites wanted the government to increase its contributions to the money supply others especially toward the end of the century argued for the establishment of a centralized agency with special powers of note issue a handful of writers renewed the radical jacksonians campaign for laissez faire in money and banking 3 in their view the defects of existing arrangements could best be solved by deregulation of banking and by removal of the federal government from the business of supplying money

individual organizational work and environmental influences on expatriate turnover tendencies an empirical study foreign postings for executives are costly undertakings for multinational corporations especially when they fail yet little research has been done on the causes of expatriate turnover this 155 expatriate survey assesses individual organizational work and environmental influences on both internal and external turnover tendencies it was found that job autonomy and material life satisfaction were key predictors for both internal and external turnover tendencies only for organizational turnover did job autonomy supersede material life satisfaction as the lead predictor of turnover tendencies american expatriates attach much importance to maintaining living standards in postings to foreign locations

the role of geography in financial and economic integration a comparative analysis of foreign direct investment trade and portfolio investment flows the objective of this paper is to examine the role of geography in explaining the patterns of financial and economic integration among both developed and developing countries using a gravity model we compare north north north south and south north fdi trade and portfolio investment flows to examine how geographical factors influence these bilateral flows the results indicate that the impact of geography variables on fdi and portfolio are similar to their effect on trade geography variables have a statistically significant effect both on fdi and portfolio investment but fdi is more sensitive to distance we interpret the negative effect of distance as the existence of information costs in financial flows also bilateral fdi trade and portfolio investment flows react to macroeconomic fundamentals in the same way however with different degrees of sensitivity there are significant differences between north north and north south flows our results find support for the argument that most fdi among industrial countries are horizontal whereas most fdi investment in developing countries is vertical the fact that the significance of geographical variables on financial flows still remained even after controlling for the macroeconomic fundamentals is in contrast with the standard capital market model the results can however be reconciled if geographical factors can proxy for information costs which may in turn explain why country portfolios are still home biased the significant effect of distance on financial flows may also explain how idiosyn cratic shocks are spread i e contagion to other countries in the same region ultimately the geographical location of a country may determine its economic and financial integration into the world economy

a laissez faire approach to monetary stability this paper develops some diverse hints for a new monetary system offered separately by fischer black eugene fama and robert e hall for reasons that will become evident though we should perhaps say payments system instead of monetary system none of the economists mentioned has actually proposed the particular system set forth here nor examined all its properties and we call it the bfh system not to implicate them but only to give credit for some component ideas and to have a convenient label l regardless of who if anyone may actually advocate the system contemplating it is instructive it illuminates by contrast some characteristics of our existing and recent systems

the central banking role of clearinghouse associations most of this clearinghouse currency was illegal but no one thought of prosecuting or interfering with its issuers as practically all of it bore the words payable only through the clearing house its holders could not demand payment for it in cash in plain language it was an inconvertible paper money issued without the sanction of law yet necessitated by conditions for which our banking laws did not provide when banks were being run upon and legal money had disappeared in hoards in default of any legal means of relief it worked effectively and doubtlessly prevented multitudes of bankruptcies which otherwise would have occurred andrew 1908b p 516

the worldwide change in the behavior of interest rates and prices in 1914 abstract this paper evaluates the role of the destruction of the gold standard and the founding of the federal reserve both of which occured in 1914 in contributing to observed changes in the behavior of interest rates and prices after 1914 the paper presents a model of policy coordination in which the introduction of the fed stabilizes interest rates even it the gold standard remains intact and it offers empirical evidence that the dismantling of the gold standard did not play a crucial role in precipitating the changes in interest rate behavior

bank regulation and monetary policy the depository institutions deregulation and monetary control act 1980 and the garn st germain depository institutions act 1982 are the two most significant pieces of bank legislation since the 193os their significance stems from the fact that they have sought to roll back a number of the regulations and restrictions imposed on bank activity and competition in the 1933 80 period among the important provisions of these acts are a gradual elimination of regulation q ceilings on time and savings deposits by march 1986 the amelioration of state imposed usury ceilings on loans the nationwide provision of interest bearing transaction type accounts negotiable order of withdrawal now and super now accounts permission for thritts to expand into bank like products such as commercial and industrial loans consumer loans and credit cards and the development of new types of savings accounts such as mmdas l in addition to legislative deregulation we have also witnessed homemade deregulation as banks have sought to exploit often with great success loopholes in the bank holding

bank runs in the free banking period free banks in the united states issued private banknotes without discretionary restriction of entry previous research suggests explanations for noteholders relatively large losses and the substantial number of banks that closed the authors examine these hypotheses and the hypothesis that contagious runs were important the evidence provides no support for the importance of wildcat banking due to par versus market valuation of bond reserves episodic but not general support for the importance of declining bond prices and support for contagion effects and contemporaries knowledge of them with little or no impact on the number of banks that closed copyright 1994 by ohio state university press

the federal reserve and panic prevention the roles of financial regulation and lender of last resort this paper surveys the role of the federal reserve within the financial regulatory system with particular attention to the interaction of the fed s role as both a supervisor and a lender of last resort the institutional design of the federal reserve system was aimed at preventing banking panics primarily due to the permanent presence of the discount window this new system was successful at preventing a panic in the early 1920s after which the fed began to discourage the use of the discount window and intentionally create stigma for window borrowing policies that contributed to the panics of the great depression the legislation of the new deal era centralized fed power in the board of governors and over the next 75 years the fed expanded its role as a supervisor of the largest banks nevertheless prior to the recent crisis the fed had large gaps in its authority as a supervisor and as lender of last resort with the latter role weakened further by stigma the fed was unable to prevent the recent crisis during which its lender of last resort function expanded significantly as the fed begins its second century there are still great challenges to fulfilling its original intention of panic prevention

modeling the banking firm a survey this paper reports on the status of the literature on micro bank modeling and assesses our understanding of the banking firm s optimal behavior this is no mean task for much has been written on banking broadly defined over the past couple of decades the review is developed in pieces each major subproblem is outlined and the analysis used to deal with the issue explicated this is not the best way to summarize the development of a field it should be immediately recognized one would prefer to have a smooth continuum of development moving the frontier of knowledge evenly through time and across subareas yet this is rarely the way a field develops more likely individual questions attract attention and are the subjects of a substantial number of contributions after a time the field moves on to the new area of interest the banking field is no exception before embarking upon the review however a couple of lines should be devoted to previous attempts there have been essentially three first pyle 1972 analyzes the uncertainty portfolio models at a time when little existed in the literature and hence one finds the review a bit vague and sketchy baltensperger s contributions 1978 1980 are the next serious and rather extensive reviews the quality of these

a fiscal theory of government s role in money i introduction economic policy has up to the turn of the century been motivated primarily by fiscal considerations f iscal measures have created and destroyed industries even where this was not their intent and have in this manner contributed directly to the construction and distortion of the edifice of the modern economy schumpeter 1954 7 why do governments play the roles they do in the monetary system in particular why have national governments almost universally taken over the business of issuing coins and paper currency and replaced precious metals with fiat money as the base supporting bankissued money why have they not in developed countries at least also nationalized the production of checking accounts choosing instead to tax and regulate private banks standard answers to these questions refer to market failures natural monopolies externalities or information asymmetries that might render unregulated private production of money inefficient or unstable or infeasible market failure explanations assume that governments shape monetary institutions to serve money holders by providing a more efficient and stable payments system than would exist under laissez faire thus private competition is not allowed in currency issue because markets inherently would fail or historically did fail there and the legal restrictions we see on deposit banking are ones needed to prevent market failures in that industry recent research supplies three reasons for doubting the adequacy of the market failure approach for explaining monetary arrangements first economic historians have found that the actual forms taken by money and banking regulations and the timing of their adoption often have little apparent connection to alleged market failures observed regulations e g reserve requirements that freeze rather than enhance liquidity are ill designed to remedy the suboptimalities that are supposed to have motivated them second monetary historians have found that systems close to laissez faire have by and large been at least as successful as more restricted systems finally monetary theorists have pointed out weaknesses in theoretical arguments for market failure in money 1 if the market failure explanation is doubtful how else can one explain government s role in money charles kindleberger 1994 xi poses the challenge squarely the economist who doubts the market failure approach has to explain why there seems to be a strong revealed preference in history for a sole issuer we propose a fiscal hypothesis governments have come to supply currency and to restrict the private supply of currency and deposits not to remedy market failures but to provide themselves with seigniorage and loans on favorable terms government currency monopolies and bank regulations can thus be understood as part of the tax system the strong revealed preference in history for a sole issuer is fundamentally the preference of fiscal authorities not of consumers 2 economic historians have of course often recognized fiscal motives behind specific monetary arrangements especially those of ancient and medieval autocracies analysts of developing countries today have recognized that policies of financial repression aim at fostering financial institutions and financial instruments from which government can expropriate significant seigniorage fry 1988 14 giovanni and de melo 1993 we go further in arguing that fiscal forces have typically shaped the industrial organization of money production throughout history and across countries and account for its major institutional features even in advanced democracies today such observed legal restrictions as statutory reserve requirements interest rate ceilings foreign exchange controls and monopoly issue of currency impede efficiency but raise revenue a rational dictator model to develop our hypothesis we adopt a method found in the writings of the italian fiscal theorists especially amilcare puviani

a conceptual model of expatriate turnover many factors may contribute to the high rate of expatriate turnover experienced by u s multinational corporations the objective of this article is to present a comprehensive model of the expatriate turnover process by identifying the key contributing factors and suggesting intermediate linkages and relationships the model appears to have both managerial and theoretical implications

what you do depends on where you are understanding how domestic and expatriate work requirements depend upon the cultural context to empirically address the importance of the cultural context for successful assignments we conducted two studies using a large sample of public sector us professionals working in comparable jobs in 156 different countries the results provided direct evidence that social and perceptual skill reasoning ability and adjustment and achievement orientation personality requirements are higher in expatriate assignments which has implications for pre departure selection also the results partly supported the hypothesis that expatriates are required to adjust their behavior to be consistent with the local cultural values which has implications for post arrival behavioral training

more on the behavior of interest rates and the founding of the fed abstract the paper addresses the issue of the impact of the foundation of the federal reserve system in 1914 on the behavior of short term interest rates empirical evidence is presented showing that no change of regime can be detected in the process governing short term rates in the years straddling the foundation of the fed since the behavior of this process did change in the decade 1910 1920 the paper discusses some historical events and institutional changes in the new york money market that had an impact on the behavior of short term interest rates between 1908 and 1920

free banking and information asymmetry a traditional argument against free banking is that it will collapse because of information externalities it is impossible for depositors to tell whether a high deposit rate offered by a bank is due to its high efficiency or risky lending strategy this paper shows that in a separating equilibrium a higher quality bank offers a lower deposit rate and holds a smaller proportion of risky loans than a lower quality bank to signal its underlying quality hence free banking is not inherently unstable the empirical results for the hong kong banking system during 1964 65 are consistent with the hypothesis of a separating equilibrium

private production of scrip money in the isolated community this paper examines the appearance of one type of privately produced currency which had the generic label scrip this money appeared at widely different times and places in the united states between 1820 and 1940 in spite of federal laws prohibiting its issue the most sophistic ated and best developed example of scrip seems to have occurred in th e coal mining regions of appalachia especially in west virginia thi s experience and its implications for monetary behavior are examined here copyright 1987 by ohio state university press

payment system disruptions and the federal reserve following september 11 2001 abstract the monetary and payment system consequences of the september 11 2001 terrorist attacks and the federal reserve s response are reviewed interbank payment disruptions appear to be a central feature of many us banking crises and interbank payment disruptions seem likely to recur federal reserve credit extension following september 11 succeeded in massively increasing the supply of banks balances to satisfy the disruption induced increase in demand and thereby ameliorate the effects of the shock relatively benign banking conditions helped make fed credit policy manageable an interbank payment disruption that coincided with less favorable banking conditions could be more difficult to manage given current daylight credit policies paying interest on reserves would facilitate improvements in daylight credit policy

financial intermediation and price level control abstract because currency and deposits are not perfect substitutes in all transactions there are simplified financial systems in which control of the supply of currency is sufficient to control the price level most important in a currency supply approach price level control does not imply control of financial intermediation thus price level goals never have to be weighed against the availability of credit to finance real activity

the cost of capital in international financial markets local or global abstract this paper analyzes to what extent international and domestic asset pricing models lead to a different estimate of the cost of capital for an individual firm under the maintained assumption of perfect international financial integration we distinguish between i the multifactor solnik sercu icapm including both the global market portfolio and exchange rate risk premia and ii the single factor domestic capm we use a sample of 3 293 stocks from nine countries in the period 1980 1999 the domestic capm yields a significantly different estimate of the cost of capital from the multifactor icapm for only five percent of the firms in our sample we attribute the close correspondence between local and global pricing to strong country factors in individual stock returns which are probably due to lack of real integration our results reinforce the home bias puzzle

on the welfare properties of fractional reserve banking monetary economists have long recognized a tension between the benefits of fractional reserve banking such as the ability to undertake more profitable long term investment opportunities and the difficulties associated with it such as the risk of insolvency for each bank and the associated losses to bank liability holders i show that a specific banking arrangement a joint liability scheme provides an effective mechanism for ensuring the ex post transfer of reserves from liquid banks to illiquid banks so it is possible to select a socially efficient reserve ratio in the banking system that preserves the safety of bank liabilities as a store of value and maximizes the rate of return paid to bank liability holders

the role of the federal reserve as lender of last resort and the seasonal fluctuation of interest rates the federal reserve s role as a lender of last resort may explain why the seasonal fluctuation of interest rates appeared to decline around 1914 the creation of the fed reduced the seasonal fluctuation of both the probability of a bank receiving an emergency loan and the probability of a financial panic the seasonality of real interest rates could therefore have declined regardless of whether the fed conducted seasonal open market operations the evidence is consistent with the lender of last resort model copyright 1991 by ohio state university press

when do international human capital enhancing practices benefit the bottom line an ability motivation and opportunity perspective we study the conditions under which firms can capitalize on their international human capital ihc using the ability motivation opportunity amo perspective we conceptualize ihc as ability collaborative climate as motivation and the firm s level of internationalization as opportunity we test three alternative amo models the additive model main effect the combinative model two way interactions and the multiplicative model a three way interaction using a cross industry sample of south korean firms we find support for the multiplicative model specifically the relationship between ihc enhancement practices and firm performance is significant and positive only when both collaborative climate and internationalization are high