corporate social irresponsibility are consumers biases in attribution of blame helping companies in product harm crises involving hybrid products in recent years there have been several high profile recalls of hybrid products those where organizations in multiple countries take part in the design component sourcing manufacturing and marketing of a product if consumers perceive a global firm to be responsible for the recall then it will reduce their brand equity therefore global firms may respond in ethically questionable ways to justify themselves to important stakeholders and avoid blame understanding how stakeholders attribute blame for crises involving hybrid products is important to shed light on the unethical manner in which global firms might avoid blame in such situations the research reported here shows that in a hybrid product crisis consumers show a bias in favor of the brand company and against the manufacturing company this bias is more pronounced when the country of manufacture has an unfavorable image or when consumers lack familiarity with the recalled brand ambiguous recall announcements by companies that fail to provide a specific and clear reason for the product defect prompt consumers to assume that a manufacturing flaw caused the product defect as a result consumers reduce their attribution of blame for the brand company and thus its brand equity is maintained

reputation as a benefit and a burden how stakeholders organizational identification affects the role of reputation following a negative event research about the effects of an organization s general reputation following a negative event remains equivocal some studies have found that high reputation is a benefit because of the stock of so

how firms respond to financial restatement ceo successors and external reactions although past studies have paid considerable attention to firms reputations few have investigated the actions that firms take following a reputation damaging event we identify firms involved in financial earnings restatements and examine whether naming a successor ceo with specific qualities serves to signal the seriousness of a firm s efforts to restore its reputation using theories of market signaling we argue that attributes of successor ceos significantly influence the reactions of key external constituencies in particular firms with more severe restatement tend to name successors who have prior ceo or turnaround experience and a more elite education the naming of such successors results in more positive reactions from the stock market financial analysts and mass media we argue that these attributes send messages to stakeholders and the broader public about the ceo s credibility and the firm s efforts

the bond old bond spread abstract i document the profits on a trade that is long the old 30 year treasury bond and short the new 30 year treasury bond and is rolled over every auction cycle from june 1995 to november 1999 despite the systematic convergence of the spread over the auction cycle the average profits are close to zero the difference in repo market financing rates between the two bonds is a significant cost of carry in this trade i show that variation in the bond old bond spread is driven by the treasury supply of 30 year bonds as well as aggregate factors affecting investors preference for liquid assets

dynamics of niche width and resource partitioning this article examines the effects of crowding in a market center on rates of change in organizational niche width and on organizational mortality it proposes that although firms with wide niches benefit from risk spreading and economies of scale they are simultaneously exposed to intense competition an analysis of organizational dynamics in automobile manufacturing firms in france germany and great britain shows that competitive pressure not only increases the hazard of disbanding but also prompts organizational transformations that give rise to processes of resource partitioning emphasizing the content process distinction in conceptualizing organizational change the article finds that the process effect of changes in niche width and position increases mortality hazards we discuss our findings in light of the processes investigated by the ecological theories of density dependence resource partitioning and structural inertia and point to the theoretical links that help to integrate these theories

consumption and the credit market abstract this paper uses a kalman filter model to allow the fraction of current income consumers to vary over time and shows that these consumers are liquidity constrained by relating this percentage to measures of credit market tightness

a status based model of market competition this article explores the significance of status processes for generating and reproducing hierarchy among producers in a market it develops a conception of a market as a status order in which each

in defense of base drift the federal reserve has been criticized for allowing the base from which it calculates its target growth paths for the monetary aggregatesto drift from year to year in response to past deviations from target drift in the base implies that target misses permanently affect the levels of the monetary aggregates using a simple theoretical model this paper shows that the optimal degree of base drift consistent withprice stability depends on the importance of permanent versus transitory income and velocity disturbances neither zero base drift nor complete base drift are likely to be compatible with price stability copyright 1986 by american economic association

conditional exchange rate volatility and the volume of foreign trade evidence from seven industrialized countries there has long been a concern over the volatility of exchange rates and their impact on the volume of foreign trade however very little attention has been paid to the choice of an appropriate volatility variable as well as the proper specification of the trade equation the sample standard deviation of the exchange rate has been used as a proxy for exchangerate uncertainty in empirical studies that examine the effects of exchange rate uncertainty on the volume of foreign trade see for example akhtar and hilton 1 and gotur 27 these studies have provided conflicting evidence on this issue it has been argued that use of the sample standard deviation is inappropriate because the empirical distribution of exchange rates is not normal 22 10 in this regard subsequent empirical research 12 36 40 41 11 has employed a moving standard deviation of the rate of change of the exchange rate as a proxy for exchange rate uncertainty chowdhury 11 obtained a clear pattern of results that support the hypothesis that the higher volatility of exchange rates led to a reduction in international trade transactions after the breakdown of the bretton woods system in march 1973 other studies have reported ambiguous results 2 the moving standard deviation used in these studies has been criticized in the literature for a ignoring relevant information on the random process generating exchange rates 18 b underestimating the effect of volatility on decisions 52 c distorting the measurement of the volatility variable by smoothing the series 9 and d injecting an element of arbitrariness into the calculation through decisions about the order m of the moving average 43 3

status inconsistency and product valuation in the california wine market this study develops a theoretical model on the role of multidimensional status and status inconsistency in market evaluation processes a product or an organization may acquire multiple status indicators in association with a multitude of market institutions we argue that when status indicators are consistently positive each exerts a greater positive effect on the valuation of a product or an organization conversely inconsistency among multiple indicators undermines the status claim we test this theoretical proposition by examining patterns of product valuation in the california premium wine market our findings show that when an individual wine s tasting score rated by critics and another more general status indicator classified appellation affiliation extra designation on the label or a winery s organizational status are consistently positive each makes a greater contribution to wine price in contrast when status indicators are inconsistent the value of the positive status indicator is reduced our study explicates the scope conditions under which market status may yield different outcomes and sheds light on the interplay among status indicators in market valuation

potential information and target variables for uk monetary policy the relationship between traditional monetary policy goal variables nominal gdp real gpd and the inflation rate and a number of financial market variables is investigated the question examined is which if any of these financial market variables monetary aggregates interest rates and interest rate spreads are potentially useful as either information variables or intermediate targets while the implications concerning the usefulness of the financial variables considered are pessimistic concerning nominal gdp more robust relationships are found for real gdp and inflation the latter finding is of interest given the current uk monetary policy strategy of inflation targeting our results are however more supportive of the usefulness of several financial variables as information variables than as intermediate targets

why the microbrewery movement organizational dynamics of resource partitioning in the u s brewing industry1 the number of small specialty brewers in the u s beer brewing industry has increased dramatically in recent decades even as the market for beer became increasingly dominated by mass production brewing companies using the resource partitioning model of organizational ecology this article shows that these two apparently contradictory trends are fundamentally interrelated hypotheses developed here refine the way scale competition among generalist organizations is modeled and improve the theoretical development of the sociological bases for the appeal of specialist organizations products especially those related to organizational identity evidence drawn from qualitative and quantitative research provides strong support for the theory the article offers a brief discussion of the theoretical and substantive issues involved in application of the model to other industries and to other cultures

money income prices and interest rates including data from the 1980s sharply weakens the postwar time series evidence indicating significant relationships between money however defined and nominal income or between money and either real income or prices separately focusing on data from 1970 onward destroys this evidence altogether evidence indicating cointegration of real income and real money balances with due allowance for the effect of interest rates also deteriorates when the sample extends through the 1980s a positive finding is that the spread between the commercial paper rate and the treasury bill rate consistently contains highly significant information about future movements in real income copyright 1992 by american economic association

from plan to plant effects of certification on operational start up in the emergent independent power sector in this paper we study the transition from planned venture to operational start up in the emergent independent power sector planned ventures face tremendous obstacles in assembling the resources necessary to begin operations we hypothesize and show that formal certification from authorized actors increases the likelihood of making this transition moreover we find that the effects of certification are contingent on the legitimacy of the sector as a whole certifications have a stronger effect on start ups when sector legitimacy is low than when it is high this research helps us understand a rarely studied organizational transition from entrepreneurial intention to actual operations within nascent sectors it directs attention to the legitimating effects of formal certification highlights the importance of a multilevel approach to legitimacy and contributes to the growing rapprochement between entrepreneurial studies and institutional theory

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

open vs sealed bid auctions testing for revenue equivalence under singapore s vehicle quota system using data from the auction of vehicle quota licenses in singapore we study if revenue equivalence holds when the auction format was switched from a sealed bid format may 1990 to june 2001 to an open bidding format since july 2001 our econometric analysis indicates the change in auction format led to a change in bidding behavior on average the quota license premium under the open bidding format is about us 1000 about 7 5 of the category e license price in june 2001 lower compared to the forecast level that would have prevailed if there had been no change in the auction format

public sector technical inefficiency in large u s cities abstract technical inefficiency is the extent to which production is below the maximum possible given the mix of chosen inputs controlling for the determinants of local property value that a local government cannot change a city produces local property value through the expenditure and revenue choices that it makes if a city is generating the highest attainable market value of aggregate property within its boundaries given the local fiscal choices that it has made then it is producing local government in a technically efficient manner in this paper using the concept of the stochastic frontier production function we measure technical inefficiency in the local public sector based upon a comparison of local property values the specification introduced allows the random component associated with the presence of technical inefficiency to depend on factors that have been suggested as limiting or enhancing technical inefficiency using a sample of 49 u s central cities we find that large city governments in the united states are operating at different degrees of technical inefficiency and the degree of technical inefficiency varies inversely with measured levels of competitive pressures

the equilibrium fed funds rate and the indicator properties of term structure spreads i introduction interest rate spreads figure prominently in the economics literature as monetary policy indicators for instance while some writers have focused on the predictive power of the spread between the six month commercial paper rate and the six month treasury bill rate others have emphasized spreads between short and long term interest rates 1 this paper follows the latter tradition my analysis is motivated by the work of bernanke and blinder 1992 who compare the difference between the federal funds rate and the ten year government bond rate with other interest rate spreads and find it to be a particularly useful predictor of future economic activity the rationale for using term structure spreads as monetary policy indicators is relatively straightforward 2 when assessing the stance of monetary policy it is not just the level of the federal funds rate that matters but how it relates to some implicit notion of equilibrium interest rates this insight is not new and can be found in the seminal work of wicksell 1898 xxv who wrote that it is not a high or low rate of interest in the absolute sense which must be regarded as influencing demand the causative factor is the current rate on loans as compared with what i shall be calling the natural rate of interest the direct empirical implementation of the wicksellian insight is however obviously hampered by the fact that the natural rate of interest is not an observable variable as suggested by laurent 1988 and bernanke and blinder 1992 the slope of the term structure is often used as a proxy for the spread between a short term interest rate and its unobservable equilibrium level thus the yield curve steepens as short term interest rates are perceived to be below their equilibrium levels i follow a more direct approach to measuring the stance of monetary policy instead of using the slope of the term structure as a proxy for the gap between observed and equilibrium federal funds rates i introduce a model based method to constructing a measure of the level of the equilibrium funds rate as described below this equilibrium rate is calculated for the real sectors of the economy conditional on the observed rate of inflation thus the equilibrium rate is constructed to be independent of the inflation objectives of monetary policy and the implied difference between actual and equilibrium rates the funds rate spread constitutes my monetary policy indicator this paper provides an overview of the proposed methodology and compares the funds rate spread with traditional indicators of the monetary policy stance ii a model based measure of the spread i rely on the estimated structure of a macroeconometric model to measure the equilibrium federal funds rate the theoretical framework is the mit penn ssrc mps model which is housed at the federal reserve board this is a large scale quarterly model of the u s economy it consists of more than 100 behavioral equations about 200 identities and over 100 exogenous variables in its theoretical foundations the long run properties of the model are akin to a neoclassical growth model whereas the dynamic structure is essentially keynesian 3 the approach used in this paper is a departure from the traditional literature in at least two dimensions first i use an explicit theoretic framework to compute the equilibrium measure as opposed to the empirically based approach of using long term interest rates second by focusing on the equilibrium level of the federal funds rate i have a more direct way to gauge the stance of monetary policy the equilibria analyzed here correspond to intermediate run dynamics a time frame that seems most relevant for the conduct of monetary policy conceptually the equilibrium notion i explore is a simple one for a given position of the mps model s is block the equilibrium federal funds rate is defined as the one consistent with unemployment at its natural rate after all lags in the model have fully worked through

us domestic currency in forecast error variance decompositions of inflation and output we find that domestic currency currency corrected for foreign holdings has a substantial share in forecast error variance decomposition of us inflation we also find that domestic currency has higher share of the forecast error variance decomposition of us real output than any other narrow monetary aggregate we consider

market incentives for safe commercial airline operation using a sample of nearly all fatal u s airline accidents between 1960 and 1985 this paper attempts to quantify the costs that airlines incur due to crashes the potential costs include those due to loss of life and equipment tort liability increased regulatory oversight and loss of demand as consumers turn away from products perceived to be unsafe examination of the deviations from expected demand following accidents reveals little or no effect prior to airline deregulation and weak indication of a response to recent crashes these results are consistent with the changes in an airline s equity value following an accident which are statistically significant but quite small relative to the total social cost of the accident

crisis and competition in expert organizational decision making credit rating agencies and their response to turbulence in emerging economies firms often delegate elements of strategic decisions to outside experts who promise objective assessments which are especially valuable in unstable environments however experts themselves may be prone to skewed decision making as the stability of their own industry environment changes and as their positioning within the industry shifts we examine this possibility in the context of expert credit rating agencies agencies and their risk ratings of emerging market sovereign borrowers ratings published from 1987 to 1998 a period that includes both industry stability 1987 1996 and industry turbulence set off by financial crises in several emerging market countries 1997 1998 after controlling for macroeconomic and related objective risk factors linked to the sovereigns themselves we find several points 1 agency ratings during crisis induced industry turbulence are negatively skewed indicating undue pessimism among these experts in line with decision making perspectives predicting negative reaction by experts in an effort to retain legitimacy with salient stakeholders in this case investors and public regulators 2 this negative shift is greater for incumbent firms and regionally focused firms possibly because of the loss of previous informational advantages and 3 this negative shift during crisis induced turbulence is greater as industry rivalry among these experts increases in particular market segments possibly indicating the development of competitive bandwagons among experts together our results suggest that objective assessments by expert organizations are vulnerable to substantial distortion from the confluent effects of industry instability and expert positioning within the industry particularly positioning affecting rivalry among experts ironically experts may be most likely to mislead clients in unstable industry environments when experts command greater attention and should show greater fidelity to disinterested objectivity

risk and macroeconomic activity this article explores the macroeconomic role that risk plays using the baa aaa spread as the measure of risk first it shows that meaningful upward movements in this spread are associated with recessions and their severity second it includes the baa aaa spread in a structural vector autoregression var to identify a shock to risk and finds that it causes a statistically significant and economically important decrease in output as well as increased holdings of real money balances third it uses historical decompositions to show that the shock to risk explains an important part of the declines in output during four post 1970 recessions notably the shock to risk explains almost none of the decline in output during 2001 prior to the september 11 2001 terrorist attacks but does clarify why the recovery was relatively weak afterwards and it explains the bulk of the decline in output during 2008 and 2009

an investigation of real versus perceived csp in s p 500 firms firms are spending billions annually in the name of corporate social responsibility csr whilst markets are increasingly willing to reward good and responsible firms they lack the instruments to measure corporate social performance csp to convince investors and other stakeholders firms invest heavily in building a reputation for good corporate behaviour this article argues that reputations for csp are often unrepresentative of true csp and investigates how differences in perceived and actual as measured by the fortune and kld databases respectively can partly be explained by firm characteristics amongst other things it finds that overrated firms are more likely to be relatively big profitable operating in non polluting but competitive industries and with no history of wrong doings to their primary stakeholders they will also typically spend a lot of effort satisfying the claims of their secondary stakeholders above all the results emphasise the need for researchers to recognise that the databases measure different phenomenon and are not interchangeable

multinationals and corporate social responsibility in host countries does distance matter prior studies have found that foreign affiliates of multinational enterprises mnes suffer from liability of foreignness lof foreign affiliates may be able to improve their social legitimacy and overcome lof by demonstrating social commitment to host country constituents through corporate social responsibility csr if lof is positively related to the distance between the home and host countries and csr activities confer social legitimacy benefits on foreign affiliates we should expect csr activities and distance to be positively related however we argue that despite this potential motivation foreign affiliates from more distant home countries are in fact less likely to engage in host country csr our argument focuses on the ways in which distance affects the mne s willingness and ability to engage in csr abroad we also predict that host country csr reputation negatively moderates this relationship using community reinvestment act data for foreign bank affiliates from 32 countries in the united states over 1990 2007 we find strong support for our hypotheses the paper enriches our understanding of csr practices in mnes and of when and how mnes try to overcome legitimacy issues in host countries

political institutions and sorting in a tiebout model we construct a computational model of tiebout competition and show that political institutions differ in their ability to sort citizens effectively in particular we find that certain types of institutions those that become more politically unstable as citizen heterogeneity increases perform relatively poorly given a single jurisdiction yet these same institutions perform relatively well when there are multiple jurisdictions we provide an explanation for this phenomenon which draws upon simulated annealing a discrete nonlinear search algorithm jel

the success of the fed and the death of monetarism i introduction there has been a significant reduction in the macroeonomic volatility in the u s economy during the last 20 yrs the standard deviation of the central bank s target variables like inflation and nominal gross domestic product gdp declined substantially however at the same time the standard deviation of monetary aggregates has increased 1 this unique macroeconomic phenomenon is also associated with the disappearance of correlation between inflation and money growth this is in contrast to the monetarist argument that suggests that an important cause of economic instability is excess variation in the growth rate of money the most famous monetarist prescription for monetary policy is milton friedman s proposal that the growth rate of money should be constant there is however no evidence of falling variations in the growth rate of money over the last 20 yrs in fact the standard deviation of the rate of growth of monetary base has increased from 1 63 during 1960 1982 to 3 1 during 1983 2003 milton friedman in an interview with taylor 2001 pointed out that there was a breakdown in the relationship between money and gdp after 1980 which came along with a dramatic reduction in the variability of growth rate of gdp friedman says i am puzzled about is whether and if so how they suddenly learned how to regulate the economy does alan greenspan have an insight into the movements in the economy and other shocks that the people don t have friedman further says it looks as if somehow in 1991 1992 they were able to install a good thermostat instead of a bad one is alan greenspan a good thermostat compared to other fed chairmen taylor 2001 there is widespread consensus on the effect of monetary policy on inflation in the long run however there is no consensus on how monetary policy affects real output in the short run there is now a consensus among economists that the original monetarist proposition that there is no long run trade off between inflation and unemployment is correct monetarism can also be viewed as the platform from which the rational expectation revolution took off however the monetarist proposition that economic fluctuation is caused by excessively variable monetary growth has largely been abandoned authors like estrella and mishkin 1997 and feldstein and stock 1994 find that monetary aggregates do not have a significant informational content after 1979 and hence cannot be used as an information variable for the stance of monetary policy their finding is also consistent with dwyer 2002 and dwyer and hafer 1999 who find that there is little correlation of inflation and money growth across countries on quarterly and annual bases after 1979 the literature finds significant correlation e g lucas 1980 between money growth and inflation in the pre 1979 period but this correlation has disappeared after 1979 see table 1 and figures 1 4 if stabilization policy makes inflation a constant then there will be no correlation between inflation and policy as no variable is correlated with a constant according to kochin 1973 if the monetary authority is able to stabilize the economy by optimally setting the variability of the control variables e g monetary aggregates and interest rate then there will be no correlation between the goal variable e g inflation and nominal gdp and the control variable even if the policy is not perfect if the policy is too variable and even if it is well timed then a countercyclical policy adopted by the central bank might lead to greater variability in the goal variable as argued by friedman 1953 poole 1993 1994 and tanner 1993 also argue that one predictable consequence of optimal monetary policy is that the correlation between monetary policy instruments and policy goals will be driven to zero poole further contends that it is obvious to any careful reader of theil 1964 that optimally variable policy will give rise to a zero correlation between policy and goal variable

asymmetries in housing and financial market institutions and emu despite convergence pressures differences in housing and financial market institutions across the 15 member states of the european union are still enormous this paper argues that they have profound effects on the responsiveness of output and inflation in the different countries to changes in short term interest rates as well as to asset market shocks of external origin the economic reasoning behind this claim is set out and the institutional differences are described the paper assesses the sometimes conflicting empirical evidence on this issue barriers to convergence and implications for labour market flexibility are discussed the uk ireland finland and sweden tend to cluster at one extreme of the relevant institutional characteristics the paper concludes with a set of proposals for institutional reforms which would significantly reduce the tensions within emu and the potential for instability in these economies entailed by emu membership

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

the signaling effect of corporate social responsibility in emerging economies what signals do firms in emerging economies send to stakeholders when they adopt corporate social responsibility csr practices we argue that in emerging economies firms that adopt csr practices positively signal investors that their firms have superior capabilities for filling institutional voids from an institution based view we hypothesize that the institutional environment moderates the signaling effect of csr on a firm s financial performance based on a sample of firms from ten asian emerging economies we find a positive relationship between csr practices and financial performance this positive relationship is stronger in the less developed capital market than in the more developed one the financial benefits of csr practices are also more salient in the low information diffusion market than in the high one we emphasize that signaling theory and the institution based view can jointly contribute to the csr literature

markets as information gathering tools the academic literature wall street commentary and even daily news reporting reflect a belief that markets can anticipate events the current movements in the stock market are interpreted as reflecting the likelihood that the federal reserve system will change interest rates futures markets are interpreted as reflecting the best estimates of things to come movements in individual stock prices are thought to anticipate earnings reports or the probability of a merger or buyout if we want to know about future weather in the south we should study the orange juice futures the academic journals are filled with the concept of rational expectations in which current prices are supposed to reflect the sum of all knowledge in the system prices according to this theory are a statistic that indicates the aggregation of information about underlying states of the economy those who are outsiders to the information in the system become insiders by simply observing the economic activity

asymmetric decoy effects on lower quality versus higher quality brands meta analytic and experimental evidence prior research demonstrates that adding decoys to choice sets can increase choice shares of brands similar to decoys while reducing shares of brands dissimilar to decoys such effects have been dubbed attraction effects and violate the principles of independence of irrelevant alternatives ha and regularity we report a meta analysis that in addition to revealing heretofore unsupported range effects demonstrates an effect of brand quality decoys reduce shares of lower quality competitors more than they reduce shares of higher quality competitors moreover whereas iia is violated throughout regularity is violated only when higher quality brands are targeted decoys increase shares of higher quality brands but typically do not increase shares of lower quality brands to assess the generalizability of the meta analytic pattern we tested decoy effects on two distinct populations in a large experiment the more traditional population replicated the meta analytic pattern standard asymmetry while the more nontraditional population reversed it these findings suggest that while the standard asymmetry is replicable it may not generalize to all market segments

rational expectations and the aggregation of diverse information in laboratory security markets the idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization hurwicz 1972 and rational expectations lucas 1972 we report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations in two of the three series one in which participants trade a complete set of arrow debreu securities and a second in which all participants have identical preferences double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium

after the break up the relational and reputational consequences of withdrawals from venture capital syndicates organizational theorists are increasingly interested in the antecedents of terminating interorganizational relationships but have paid little attention to the disruptive consequences of such termi

the predictive power of the term structure of interest rates in europe and the united states implications for the european central bank abstract this paper examines the relationship of the term structure of interest rates to monetary policy instruments and to subsequent real activity and inflation in both europe and the united states the results show that monetary policy is an important determinant of the term structure spread but is unlikely to be the only determinant in addition there is significant predictive power for both real activity and inflation the yield curve is thus a simple and accurate measure that should be viewed as one piece of useful information which along with other information can be used to help guide european monetary policy

corporate reputation and collective crises a theoretical development using the case of rana plaza banking scandals accounting fraud product recalls and environmental disasters their associated reputational effects as well as company response strategies have been well reported in the literature reported crises and scandals typically involve one focal company for example bp and the 2010 deepwater horizon accident as business practices change and company supply chains become more complex and interlinked there is a greater risk of collective crises where multiple companies are associated with the same scandal we argue that companies are likely to behave differently in a group setting compared to when faced with a crisis individually using an inductive approach we examine the case of the rana plaza building collapse we find that organizations with a history of similar crises adopt defensive strategies and communicate much later compared to organizations which adopt accommodative strategies contrary to the individual case in a collective crisis accommodative strategies result in more negative reputational damage and a higher burden of responsibility we propose that the relationship between crisis response strategy and organization reputation is moderated by the crisis setting we extend the logic of crisis management and corporate reputation to incorporate the case of a collective crisis

predicting u s recessions financial variables as leading indicators this paper examines the out of sample performance of various financial variables as predictors of u s recessions series such as interest rates and spreads stock prices and monetary aggregates are evaluated individually and in comparison with other financial and nonfinancial indicators the analysis focuses on out of sample performance from one to eight quarters ahead results show that stock prices are useful with one to three quarter horizons as are some well known macroeconomic indicators beyond one quarter however the slope of the yield curve emerges as the clear individual choice and typically performs better by itself out of sample than in conjunction with other variables

stochastic trends and economic fluctuations are business cycles mainly the result of permanent shocks to productivity this paper uses a long run restriction implied by a large class of real business cycle models identifying permanent productivity shocks as shocks to the common stochastic trend in output consumption and investment to provide new evidence on this question econometric tests indicate that this common stochastic trend cointegration implication is consistent with postwar u s data however in systems with nominal variables the estimates of this common stochastic trend indicate that permanent productivity shocks typically explain less than half of the business cycle variability in output consumption and investment copyright 1991 by american economic association

the harm of symbolic actions and green washing corporate actions and communications on environmental performance and their financial implications we examine over 100 top performing canadian firms in visibly polluting industries as we seek to answer four research questions what specific environmental issues are firms addressing how do these issues differ between industries are both symbolic and substantive actions financially beneficial does green washing measured as the difference between symbolic and substantive action and or green highlighting measured as the combined effect of symbolic and substantive actions pay we find that substantive actions of environmental issues green walk neither harm nor benefit firms financially but symbolic actions green talk are negatively related to financial performance we also find that green washing discrepancy between green talk and green walk has a negative effect on financial performance and green highlighting concentrated efforts of the talk and walk has no effect on financial performance in this article we provide explanations of our findings and put forth future research directions

ripples of fear the diffusion of a bank panic community reactions against organizations can be driven by negative information spread through a diffusion process that is distinct from the diffusion of organizational practices bank panics offer

product reliability and firm value the experience of american and japanese automakers 1973 1992 in a typical month several recall campaigns of motor vehicles are announced by automobile manufacturers they are carried out to correct defective vehicles whether safetyor pollution related recalls imply that the products made available to consumers are not what they were supposed to be a question arises then as to whether and how much the offending automakers are affected by these recall campaigns the answer to this question has been ambiguous in the literature we have two purposes in this paper first on the basis of a longer and broader database we offer additional and more conclusive evidence that documents significant and negative market reactions to automobile recall announcements our finding therefore helps to resolve the ambiguity in the literature on this question second we offer new evidence on japanese automobile companies they too suffer from significant and negative stock market reactions but the incidence of recalls is less frequent perhaps as a result the magnitude of the stock market reaction to each recall is somewhat larger nevertheless because recalls are much less frequent the total losses

a test for allocative efficiency in the local public sector abstract this paper develops a test for pareto efficiency in the local public sectorusing the analytical result that aggregate property value is maximized at the public output level which satisfies the samuelson condition for efficiency by using cross section data it is possible to deduce whether a representative community provides its public goods in a property value maximizing and hence efficient fashion the empirical results show no systematic tendency to either under or over provide public goods in a sample of massachusetts communities

monetary policy and the transaction role of money in the us the declining importance of money in transactions can explain the well known fact that u s interest rate policy was passive in the pre volcker period and active after 1982 we generalise a standard cashless new keynesian model woodford2003 by incorporating an explicit transaction role for money in the pre volcker period we estimate that money did play an important role and determinacy required a passive interest rate policy however after 1982 money no longer played an important role in facilitating transactions correspondingly the conventional view prevails and an active policy ensured equilibrium determinacy

credit growth monetary policy and economic activity in a three regime tvar model we employ a threshold vector autoregression tvar methodology in order to examine the nonlinear nature of the interactions among credit market conditions monetary policy and economic activity we depart from the existing literature on the subject along two dimensions first we focus on a model in which the relevant threshold variable describes the state of economic activity rather than credit market conditions second in contrast to the existing tvar literature which concentrates exclusively on single threshold models we allow for the presence of a second threshold which is overwhelmingly supported by all relevant statistical tests our results indicate that the dynamics of the interactions among credit market conditions monetary policy and economic activity change considerably as the economy moves from one phase of the business cycle to another and that single threshold tvar models are too restrictive to fully capture the nonlinear nature of those interactions the impact of most shocks tends to be largest during periods of sub par economic growth and smallest during times of moderate economic activity by contrast credit risk shocks have the largest impact when output growth is considerably above it long term trend

on consequences and criticisms of monetary targeting the purpose of this paper is to review and evaluate the most important existing criticisms of policy strategies that feature adherence to money stock targets four main categories of criticism and counterargumerits are analyzed the first of these involves the claim that accurate money stock control is infeasible while the second contends that such control can only be obtained along with extreme volatility of interest rates the third emphasizes difficulties resulting from technical change and deregulation and the fourth concerns strategic issues of rules vs discretion activist vs non activist policy and the logical function of intermediate targets this abstract was borrowed from another version of this item

the critical trade off identity assignment and box office success in the feature film industry researchers have begun to study markets that are structured in terms of an opposition between market identities in a manner akin to the role pairs analyzed in structural role theory in this paper we analyze the feature film market which came to have such a role structure by the mid 1990s by exploiting the contingency that pertains to the identity of newly released films and the intermediary function played by critics we assess the tendency for offerings to be assigned one or the other of the available market identitiesc independent or major an analysis of the box office success of 396 feature films released in 1997 shows that a film attracted a larger audience when critics who specialized in major releases reviewed the film and implicitly certified it as fit for the mass market such classification was particularly crucial for breaking out of the initial constraints set by theatrical exhibitors however while attaining a major identity was necessary for success in the mass market it was a handicap in penetrating the art house this trade off illustrates how market structures restrict identity in a manner akin that by which role structures place constraints on the identities available to individuals copyright 2003 oxford university press

do market prices aggregate information about macroeconomic uncertainty or risk this article examines several economic variables that represent either confidence in future economic conditions or the degree of risk uncertainty about future conditions in order to determine which contain more information about future employment and output some of these variables are prices while others are from surveys causality tests historical decompositions within a var and out of sample forecasts are among the tools used this article concludes that monthly stock returns contain much more information about future economic conditions than the other variables the spread between moody s baa and aaa bonds the spread between the constant maturity 10 year government bond and the federal funds rate as well as uncertainty in future economic conditions as measured by the federal reserve bank of philadelphia s business outlook survey also provide information about future economic conditions notably this article finds that monthly stock returns contain more information about future economic conditions

money and economic activity revisited abstract recent literature has concluded that money no longer plays a fundamental role in determining us economic activity especially when post 1982 data are included in the analysis we re examine the issue using annual and quarterly data sets ranging back to the civil war cointegration tests show that an equilibrium relationship holds between money and income in all data samples of 35 years or longer but frequently fails to hold for many shorter samples however when the normal monetary lags are explicitly imposed a cointegrating relationship is frequently captured even in quite short samples examining the issue in a standard five variable var model we find that money is the most important variable in explaining real output for the full 1874 1993 as well as 1952 1993 periods even allowing for interest rate effects finally using monthly data over the troublesome 1983 1994 sample we show that when appropriate adjustments are made to capture recent structural changes such as the growing importance of the international economy on us output money still granger causes economic activity

money income and dynamic lag patterns in traditional vector autoregression var models a fixed lag length is imposed on all variables and across all observation periods this practice however is prone to potential model misspecifications more specifically underparameterization due to too short lag lengths results in estimation bias while overparameterization due to too long lag lengths results in a loss of degrees of freedom and thus estimation efficiency the significance of such problems can be exemplified by recent results of money income causality tests based on conventional var methodology the empirical relationship between money and income during the postwar period has long been found fragile by litterman and weiss 7 and sims 8 recently friedman and kuttner 3 argued that since the late 1970s monetary aggregates have ceased to predict real income in a four lag var system including an interest rate variable further by extending the sample period from 1985 to 1988 they 4 weakened stock and watson s 9 statistical support for money income causality the robustness of friedman and kuttner s findings however has been questioned for example thoma 10 documented subsample instability in causality statistics particularly in the 1980s becketti and morris 1 argued for longer lag lengths in the vars webb 11 further suggested that two lag lengths one for the dependent variable and another for all independent variables be considered in each equation the objective of this paper is to provide some explanations for these puzzles first the marginal significance levels or p values of money income granger causality tests are shown to vary remarkably over subsamples as well as different lag specifications second as an extension to the standard var estimation strategy a lag selection procedure is applied to determine the optimal lag structure that can vary across both variables and observation periods the empirical results suggest that previous findings on the collapse of the money income causal relationship is attributable to lag length misspecification especially for money the rest of the paper is organized as follows the next section discusses temporal instability in causality test statistics section iii outlines a new lag selection method and section iv presents

halo spillover effects in social media do product recalls of one brand hurt or help rival brands abstractonline chatter is important because it is spontaneous passionate information rich granular and live thus it can forewarn and be diagnostic about potential problems with automobile models known as nameplates the authors define perverse halo or negative spillover as the phenomenon whereby negative chatter about one nameplate increases negative chatter for another nameplate the authors test the existence of such a perverse halo for 48 nameplates from four different brands during a series of automobile recalls the analysis is by individual and panel vector autoregressive models the study finds that perverse halo is extensive it occurs for nameplates within the same brand across segments and across brands within segments it is strongest between brands of the same country perverse halo is asymmetric being stronger from a dominant brand to a less dominant brand than vice versa apology advertising about recalls has harmful effects on both the recalled brand and its rivals furthermore

the competitive dynamics of status and niche width us investment banking 1920 1949 by integrating the status based model of market competition and the resource partitioning model this paper develops the resource status space imagery of markets and two propositions first the paper argues that the benefit that an organization derives from an increment in status is not independent of the organization s niche width second the paper considers the implications of status based stratification for the resource partitioning model s specification of the effects of increasing market concentration using the resource status space imagery this paper posits that if expanding generalists are reluctant to lower their status or are unable to increase their status they will expand within their current status level the expanding generalists will thus encroach on the niches of similar status generalists and specialists rather than expand into the niches of generalists across the whole status spectrum we discuss implications for the sociology of markets copyright 2000 by oxford university press

monetary policy lessons of recent inflation and disinflation by 1975 most economists agreed that the money demand function in the united states was reasonably stable and could serve as a reliable basis for the formulation of monetary policy those suspicious of monetarism were on the defensive in the light of the apparently inexorable increase of m1 velocity of about three percent per year with deviations of only a few tenths of a percent experience with rising money growth and rising inflation through 1980 only confirmed monetarist views as figure 1 shows all this had changed by 1986 with disinflation in the 1980s m1 velocity departed convincingly from its 1953 79 trend the money demand function seems to have fallen apart and is apparently not a reliable basis for monetary policy after all consequently the first major section following this introduction is devoted to the decline of velocity after 1981 and the demise of the standard money demand function some authors including i believe benjamin friedman conclude that this evidence leaves us so uncertain about the nature of money demand that policymakers cannot rely at all on any presumed money demand regularities in contrast my working hypothesis is that the money demand continues to be a stable function of relatively few variables but that the interest elasticity of money demand is substantially higher than previously thought others have sought money demand explanations in terms of regime shifts but that literature will not be discussed here events have not been kind to keynesian monetary policy positions either keynesians tend to concentrate on interest rates especially real interest rates as the best guide to the effects of monetary policy on the economy the real rate is discussed

disentangling the multiple effects of affiliate reputation on resource attraction in new firms past research has established that new firms can enhance their attractiveness to prospective resource providers by affiliating with more reputable firms but research on this process has yet to fully account for two critical realities underscored by recent research 1 firms need to acquire resources from different groups of resource providers and 2 reputation is multidimensional drawing on the organizational reputation literature and on information processing theory we propose that two groups of resource providers will respond differently to new firms affiliations in accordance with differences in the groups abilities to recognize and interpret reputation related signals we also propose that within a single group of resource providers distinct characteristics of the affiliate will exert different influences we test these propositions using longitudinal data from belgian firms that affiliated with venture capital vc investors consistent with our predictions we find that characteristics of a

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

congressional oversight committee influence on u s monetary policy revisited abstract grier 1991 shows that monetary policy is influenced by congress in that increases in the liberality of the senate banking committee leadership are significantly positively correlated with monetary base growth chopin cole and ellis 1996 claim that the house leadership statistically dominates the senate leadership for predicting money growth but that the direction of the effect is perverse a more liberal house leadership is associated with a lower rate of base growth in this paper i show that chopin cole and ellis s claims are unfounded properly measured both house and senate leadership have a significant positive effect on base growth over grier s 1991 original sample in later periods money growth regressions are not sufficiently stable to support hypothesis tests

the dynamics of organizational status this paper examines the growth and decline of organizational status it is argued that an organization s status is determined by two factors past performance outcomes and the status of the organization s affiliates the better the past performance outcomes and the higher the status of the affiliates the greater the organization s growth in status this basic proposition is tested in an examination of status changes among investment banks in the non investment grade market between 1981 and 1987 implications and extensions are discussed in the conclusion copyright 1996 by oxford university press

reputation and decision making under ambiguity a study of u s venture capital firms investments in the emerging clean energy sector this study examines the role of reputation on decision making under ambiguity drawing on social cognition and behavioral theories we propose that a firm s reputation exerts dual pressures on its decision making under ambiguity on the one hand a firm s reputation increases its aspirations for future performance and promotes its engagement in risky strategies to achieve them on the other hand preserving the already established reputation requires a firm to deliver consistent performance over time which promotes greater use of risk reduction strategies our analyses of the u s venture capital firms investments in the clean energy sector from 1990 to 2008 demonstrate that while reputable firms are more likely to invest in the emerging sector they also employ risk reduction strategies more extensively the sector s legitimation further influences these firms investment decisions both directly and through its interaction with firm reputation

a political model of monetary policy with application to the real fed funds rate abstract we construct an empirical model of u s monetary policy assuming that the federal reserve is an ordinary federal bureaucracy we use the real federal funds rate as our policy measure and show the existence of significant executive legislative and bureaucratic influence on the real rate of interest from 1961 to 1996 we find that presidential party is an adequate statistical measure of executive influence and that the voting scores of the senate banking committee leadership best represent legislative influence we argue that political changes cause systematic and predictable changes in monetary policy

are the effects of monetary policy asymmetric huntley schaller by building on the hamilton 1989 markov switching model we examine questions like does monetary policy have the same effect in expansions and recessions given that the economy is currently in a recession does a fall in interest rates increase the probability of an expansion does monetary policy have an incremental effect on the growth rate within a given state or does it only affect the economy if it is sufficiently strong to induce a state change e g from recession to expansion as suggested by models with sticky prices or finance constraints interest rate changes have larger effects during recessions jel e52 e32 much of the recent work in macroeconomics has proceeded under the assumption that variables follow linear stochastic processes with constant coefficients as a result some of the richness of the burns mitchell analysis such as its focus on asymmetries between recessions and expansions may well have been lost blanchard and fischer 1989 7 i introduction for decades macroeconomists have debated whether monetary policy has the same effect on real output in expansions and recessions as far back as the 1930s keynes and pigou debated whether monetary policy would have less effect on output during a severe economic downturn in the 1960s there were active debates on a very different proposition namely whether the rightward portion of the aggregate supply curve was vertical so that monetary policy would have less effect on real output during expansions in this article we provide a new type of evidence on whether monetary policy has different effects depending on whether the economy is in an expansion or recession empirical evidence on this issue is particularly relevant in light of new theoretical work in macroeconomics that predicts asymmetric effects of demand shocks conditional on the state of the economy two examples of this work are s s type models of price adjustment and models in which there are agency costs of financial intermediation 1 the intuition for the latter class of models is simple 2 when there is information asymmetry in financial markets agents may behave as if they were constrained for a variety of reasons these finance constraints are more likely to bind during recessions when the net worth of agents is low an increase in interest rates will then have two effects on investment the standard effect of increasing the cost of capital and therefore reducing investment demand and an additional effect of reducing liquidity e g by increasing debt service obligations and thus reducing investment demand for constrained agents as a result monetary policy actions that change interest rates will have greater effects during a recession 3 the s s type price adjustment models of ball and mankiw 1994 caballero and engel 1992 and tsiddon 1993 lead to a convex aggregate supply curve and therefore also imply that monetary policy will have stronger effects during recessions one of the more frequently cited empirical papers on the potentially asymmetric effects of monetary policy is cover 1992 which finds evidence that positive monetary shocks have different effects from negative monetary shocks we are looking at a different type of asymmetry namely between booms and recessions we study asymmetries using an extension of the markov switching model developed by hamilton 1989 estimated over the period 1955 93 in hamilton s econometric specification the growth rate of output depends on a state variable that corresponds to an expansion or recession this approach has several advantages first unlike linear projections it allows for nonlinearities and asymmetries second in estimating the recession coefficients it gives greater relative weight to observations that most clearly correspond to recessions and similarly for the expansion coefficients

does ownership affect the variability of the production process evidence from international courier services a firm often must ensure that products or services it produces match customer expectations we define variability as any deviation in a production process yielding products or services whose attributes differ from the firm s stated target specifications firms pursuing products marked by low variability are more subject to maladaptation costs if production processes are not adjusted to avoid nonconformities furthermore such adjustments often require idiosyncratic investments e g dedicated information technology systems thereby creating contractual hazards and potential underinvestment we hypothesize that ownership of sequential activities in the value chain helps mitigate problems associated with maladaptation as well as suboptimalities in transaction specific investment thereby resulting in lower variability using data on delivery times from the japanese international courier and small package services industry we assess the variability reducing role of ownership in two complementary ways the first approach is parametric allowing us to assess the impact of ownership on the variance associated with delivery time here we focus on shipments that frequently fail to arrive precisely within the time period initially expected by customers the second approach is more consistent with the notion of reliability or the likelihood that shipments will not arrive later than expected we nonparametrically estimate the distribution of deviations between actual and expected delivery time and verify how distinct organizational choices change the distribution ownership of multiple segments yields a particularly pronounced effect on both variance and reliability ownership bestows variability reducing benefits of ownership especially when ownership is observed in multiple stages of the value chain

efficient tests of long run causation in trivariate var processes with a rolling window study of the money income relationship this paper develops a simple sequential multiple horizon non causation test strategy for trivariate var models with one auxiliary variable we apply the test strategy to a rolling window study of money supply and real income with the price of oil the unemployment rate and the spread between the treasury bill and commercial paper rates as auxiliary processes ours is the first study to control simultaneously for common stochastic trends sensi tivity of causality tests to chosen sample period null hypothesis over rejection sequential test size bounds and the possibility of causal delays evidence sug gests highly significant direct or indirect causality from m1 to real income in particular through the unemployment rate and m2 once we control for cointe gration

running for the exit community cohesion and bank panics bank panics attract scholarly interest because they reflect distrust of each bank that experiences a run as a result of diffusion of information rumors about such bank runs trigger additional runs elsewhere however the contagion of bank runs is highly selective for reasons that are unrelated to the financial strength of the individual banks this presents a puzzle that extant theories on institutions and reputations cannot fully explain to solve this puzzle we turn to the characteristics of the community in which the banks operate we develop theory on how communities with diverse affiliation structures and economic inequality have weaker community cohesion and communication making such communities less likely to experience widespread distrust and hence bank runs we test hypotheses on the effects of community ethnic diversity national origin diversity religious diversity and wealth inequality using data from the great bank panic of 1893 and we find strong community effects on bank runs these f

the tiebout model bring back the entrepreneurs several recent papers in the literature have reformulltlated the nature of equilibrium in ifiebout mo lels by alssliuim ing an exogenous number of communities inflexible commullity l ou alaries anti in pirticular inactive lantlowners and developers ihis paper argues that these assumptions are unwarranted and resul1t iin in eterminate solutions and incorrect analyses determinate lon1g run1 solutions require equilibrium in intercommui land markets which in turn require giving lantlowners and or entrepreneurial leveloelers an active role in the models the role of politics in these models and its juxtaposition with entrepreneurial activities are also analyzed

the deterrence effects of vicarious punishments on corporate financial fraud this study extends the research on corporate financial fraud by developing a new perspective on the deterrence effects of vicarious punishments premised on social learning theory we posit that firms vicariously learn about punishments from their peers by picking up modeling cues environmental cues and social cues in the inhibitive learning process thus being deterred from committing future fraudulence using a matched sample of 604 observations of chinese listed firms between 2002 and 2008 our findings show that an observing firm is deterred from committing fraud if the peers in its industry are caught and punished we further find that such deterrence effects are subject to how the observing firm evaluates the possibility of being caught and the likelihood it will be punished the same way if it violates similar prohibitions in particular inhibitive learning effects are positively moderated by punishments of prominent firms and model observer similarity but negatively attenuated by the development of the legal system our study sheds light on the corporate fraud literature by illuminating the indirect inhibitive learning process from vicarious punishments and identifying the conditions for differential learning deterrence outcomes of the observing firms

why good firms do bad things the effects of high aspirations high expectations and prominence on the incidence of corporate illegality recent high profile corporate scandals involving prominent high performing firms cast doubt on assertions that the costs of getting caught decrease the likelihood such high performers will act illegally we explain this paradox by using theories of loss aversion and hubris to examine a sample of s p 500 manufacturers results demonstrate that both performance above internal aspirations and performance above external expectations increase the likelihood of illegal activities the sample firms prominence enhanced the effects of performance above expectations on the likelihood of illegal actions prominent and less prominent firms displayed different patterns of behavior when their performance failed to meet aspirations

do organizations have to change to learn examining the effects of technological change and learning from failures in the natural gas distribution industry failures contain valuable information however organizations vary at learning from them i ask whether failures prompt organizations to make technological investments and whether these investments help boost performance beyond improvements gained through direct organizational learning i test hypotheses on natural gas distributors to determine whether they enhance their performance by learning directly by recognizing failures as prompts to invest in safer technologies or through a combination results suggest that distributors learn directly though firms which also invest in related technologies are able to gain some additional benefits copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

unit roots interest rate spreads and inflation forecasts recent research suggests that long term interest rate spreads provide information that can be useful in forecasting inflation but that the spread between the three month and six month treasury bill rates appears to have little forecasting ability this paper uses the concepts of unit roots and cointegration to examine the failure of the short term t bill spread to forecast inflation the results suggest that the interest rate spread has little forecasting value because inflation and the interest rate spread exhibit distinctly different time series properties

edge versus center finding common ground in the capitalization debate abstract a continuing debate questions whether capitalization of taxes and public services into house price occurs the current study argues for an inverse relationship between housing supply elasticity and capitalization rates a sample is split into houses on the interior and edge of the urban area capitalization of schooling and crime occurs everywhere but it is weaker toward the edge of an urban area where housing supply elasticities and developer activity are greater tax results are less robust but the capitalization rates of crime and school quality are roughly twice as strong on the interior than on the urban fringe

is bank supervision central to central banking whether central banks should play an active role in bank supervision and regulation is being debated both in the united states and abroad while the bank of england has recently been stripped of its supervisory responsibilities and several proposals in the united states have advocated removing bank supervision from the federal reserve system other countries are considering enhancing central bank involvement in this area many of the arguments for and against these proposals hinge on the effect this change would have on the ability of the central bank to conduct monetary policy we find that confidential supervisory information on bank ratings significantly improves

the effects of real and nominal uncertainty on inflation and output growth some garch m evidence in this paper we use garch m methods to test four hypotheses about the effects of real and nominal uncertainty on average inflation and output growth in the united states from 1948 to 1996 we find no evidence that higher inflation uncertainty or higher output growth uncertainty raises the average inflation rate we also find no support for the idea that more risky output growth is associated with a higher average real growth rate our key result is that in a variety of models and sample periods inflation uncertainty significantly lowers real output growth copyright 2000 john wiley sons ltd

psychic distance and performance of mncs during marketing crises when multinational corporations face foreign marketing crises the psychic distance between the home and host country represents a distinct challenge this paper examines the curvilinear relationship between psychic distance and firm performance during marketing crises and the moderating role of marketing capabilities we test our hypotheses using an event study on a panel dataset of 217 firms based in 19 countries facing crises in 41 host countries the results show that 1 marketing crises are most harmful when the host country is either very close or far away and 2 firms can mitigate this effect with marketing capabilities

local government inefficiency and the tiebout hypothesis does competition among municipalities limit local government inefficiency the tiebout hypothesis has in the past thirty years come to refer to a number of different propositions about local public service provision first there is the point initially stressed by tiebout 15 that the mobility of consumer voters results in a market type of solution to public service provision in which people s demands for public services are revealed as they sort themselves among localities according to their tastes for public services second also discussed by tiebout is the proposition that local public services will tend toward efficient provision finally there is the claim that the mobility of consumers and the competition among the localities for these consumers make politics relatively unimportant in determining local public service provision the bulk of the empirical work on the tiebout hypothesis has attempted to determine if as tiebout suggested local public services are efficiently provided the most common approach has been to estimate the effects of public service provision and tax policy on property values and determine if a balanced budget change in the tax rate changes property values if not then property values are being maximized with respect to public services and public services therefore are efficiently provided studies using this technique include those by oates brueckner and sonstelie and portney 11 1 2 13 these empirical studies while providing evidence about whether or not public services are provided efficiently do not suggest the reasons why local public services are or are not efficiently provided are the limits on inefficiency in the local public sector attributable to local politics or are they the result of the constraints imposed on local governments because of the mobility of residents and capital evidence that local public services are efficiently provided cannot be considered support for the contention that the mobility of people and capital are the factors responsible for this efficiency romer and rosenthal 12 for example provides evidence from

a behavioral theory of market expansion based on the opportunity prospects rule what explains organizational search and choice when multiple opportunities are available to the decision makers drawing on the behavioral view of the firm and on the attention based view this study proposes a theoretical model centered on the opportunity prospects rule to explain market expansion defined as the extent how many and the selection which of multiple available opportunities that are actually pursued by competing firms we test our model using longitudinal fine grained data on commercial banks undertaking more than 1 300 opportunity choices the findings show that firms do use the opportunity prospects rule when exercising market expansion choices and that slack and performance feedback moderate the effects of opportunity prospects this paper contributes to organizational decision making research and to the behavioral view of the firm by showing the importance of considering an opportunity driven approach by demonstrating the relevance of simplifying rules to explain the search for the consequences of alternatives by extending recent efforts to provide a more forward looking perspective to model organization behavior and by showing when slack and performance feedback moderate the effects on market expansion of the opportunity prospects rule

the financial impact of product recall announcements in china abstract a product recall can be viewed as a firm s worst nightmare although the long term damage to brand equity and company reputation may be difficult if not impossible to quantify the short term impact on shareholders wealth is readily estimable while many studies have examined this issue in the western context little is known about the financial impact of a product recall announcement in china to advance the knowledge about the financial impact of a product recall announcement we explore this issue using event study methodology in general our findings are congruent with previous research that product recalls result in negative abnormal returns interestingly however we found that chinese companies suffered from greater financial losses than their western counterparts did this study also provides evidence that the chinese food industry experiences a more severe stock market reaction than the automobile industry and that a passive recall strategy was associated with a more negative stock market reaction than a proactive recall strategy we conclude with several future research avenues for global research on product recalls

the effects of money growth on inflation and interest rates across spectral frequency bands band spectral regression techniques are used to identify the frequency bands that are most important in the relationships between money growth and inflation and between money growth and the nominal interest rate the results show that cycles in the growth rate of m1 from one to two years long produce higher frequency cycles in inflation and two distinct sets of higher frequency cycles in changes in the nominal interest rate the results support models where predictable changes in money growth produce liquidity and anticipated inflation effects on nominal interest rates copyright 1994 by ohio state university press

the liability of good reputation a study of product recalls in the u s automobile industry in this paper we explore opposing theoretical claims about how organizational reputation affects market reactions to product defects on the one hand good reputation could be a disadvantage because expectations about product quality are more likely to be violated by defects in highly reputed products on the other hand a good reputation could be an advantage because of strong inertial effects on reputation orderings we empirically test these competing hypotheses using data on product recalls in the u s automobile industry from 1975 to 1999 our results support for the idea that reputation can be an organizational liability in that highly reputed firms suffer more market penalty as a result of their product recalls we also propose that the reputational effects are moderated by two important factors substitutability and generalism specialism our results show that having few substitutes with an equivalent level of reputation or a focused product identity stemming from specialism buffers the negative market reactions to product recalls we conclude with a discussion on the implications of these results for institutional reputation and status theories