money and prices under uncertainty we study whether monetary economies display nominal indeterminacy equivalently whether monetary policy determines the path of prices under uncertainty in a simple stochastic cash in advance economy we find that indeterminacy arises and is characterized by the initial price level and a probability measure associated with state contingent nominal bonds equivalently monetary policy determines an average but not the distribution of inflation across realizations of uncertainty the result does not derive from the stability of the deterministic steady state and is not affected essentially by price stickiness nominal indeterminacy may affect real allocations in cases we identify our characterization applies to stochastic monetary models in general and it permits a unified treatment of the determinants of paths of inflation copyright 2005 wiley blackwell

taylor rules in a model that satisfies the natural rate hypothesis the authors analyze the restrictions necessary to ensure that the interest rate policy rule used by the central bank does not introduce real indeterminacy into the economy they conduct this analysis in a flexible price economy and a sticky price model that satisfies the natural rate hypothesis a necessary and sufficient condition for real determinacy in the sticky price model is that there must be nominal and real determinacy in the corresponding flexible price model this arises if and only if the taylor rule responds aggressively to lagged inflation rates

nonverifiability noncontractibility and ownership determination models in foreign direct investment with an application to foreign operations in japan abstract firms intangible assets are important inputs for their foreign operations inputs of intangible assets and the resulting output are often not contractible in that neither precise use of such inputs nor potential products which can be produced by taking advantage of such inputs can be completely delineated in a contract where such incomplete contracts prevail control of residual rights becomes essential for protecting firms intangible assets ownership is often used to control residual rights in international operations in this paper we present a few interrelated models of ownership determination for firms international operations we show that a firm s ownership share in its foreign operation reflects the importance of the firm s intangible assets used in the operation and the resulting bargaining power relative to its local partners we test our theoretical implications using data on foreign firms manufacturing operations located in japan our empirical results are consistent with theoretical predictions

sophisticated monetary policies in standard monetary policy approaches interest rate rules often produce indeterminacy a sophisticated policy approach does not sophisticated policies depend on the history of private actions government policies and exogenous events and can differ on and off the equilibrium path they can uniquely implement any desired competitive equilibrium when interest rates are used along the equilibrium path implementation requires regime switching these results are robust to imperfect information our results imply that the taylor principle is neither necessary nor sufficient for unique implementation they also provide a direction for empirical work on monetary policy rules and determinacy

chaotic interest rate rules a growing empirical and theoretical literature argues in favor of specifying monetary policy in the form of taylor type interest rate feedback rules that is rules whereby the nominal interest rate is set as an increasing function of inflation with a slope greater than one around an intended inflation target this paper shows that such rules can easily lead to chaotic dynamics the result is obtained for feedback rules that depend on contemporaneous or expected future inflation the existence of chaotic dynamics is established analytically and numerically in the context of calibrated economies the battery of fiscal policies that has recently been advocated for avoiding global indeterminacy induced by taylor type interest rate rules such as liquidity traps are shown to be unlikely to provide a remedy for the complex dynamics characterized in this paper

macroeconomic forecasting using pooled international data it has long been recognized that national economies are economically interdependent see e g burns and mitchell 1946 for evidence of comovements of business activity in several countries and zarnowitz 1985 for a summary of recent evidence recognition of such interdependence raises the question can such interdependence be exploited econometrically to produce improved forecasts of countries macroeconomic variables such as rates of growth of output and so forth this is the problem that we address in this article using annual and quarterly data for a sample of european economic community eec countries and the united states

timing and real indeterminacy in monetary models an increasingly common approach to the theoretical analysis of monetary policy is to ensure that a proposed policy does not introduce real indeterminacy and thus sunspot fluctuations into the model economy policy is typically conducted in terms of directives for the nominal interest rate this paper uses a discrete time money in the utility function model to demonstrate how seemingly minor modifications in the trading environment result in dramatic differences in the policy restrictions needed to ensure real determinacy these differences arise because of the differing pricing equations for the nominal interest rate

on the determinants of multinationals ownership preferences evidence from greece and portugal abstract the aim of the paper is to examine the determinants of the ownership preferences of manufacturing multinational firms established in greece and portugal in the 1990s differences between the two countries in terms of relative fdi size industry and ownership choices are observed transaction cost arguments together with bargaining power considerations through their effects on the affiliate s expected profits provide the theoretical basis for the econometric model which uses multinomial logit analysis on greek and portuguese data the estimations contribute to a better understanding of observed differences showing that firm and industry characteristics interacting with location affect ownership decisions

use of minority and 50 50 joint ventures by united states multinationals during the 1970s the interaction of host country policies corporate strategies this article examines geographical sectoral and corporate trends in the use of minority and 50 50 joint ventures by u s multinational manufacturing and mining firms in less developed countries ldcs during the 1970s it is based primarily on data found in the harvard multinational enterprise data base as updated through the mid 1970s and supplemented with corporate performance data for the 1975 1980 period from a new international competitive analysis ica database developed with support from the general electric foundation

short and long interest rate targets can both short and long term interest rates be targeted independently can the target of the term structure help solve the problem of multiplicity of equilibria that occurs when only the short rate is targeted both questions are addressed and the answer is yes to both

the economics of joint ventures in less developed countries the paper examines the microeconomic partial equilibrium behavior of joint ventures established between transnational corporations and domestic partners in less developed countries it focuses on issues relating to resource allocation and profit distribution under various institutional scenarios the analysis places special emphasis on the role of bargaining power transfer pricing stock ownership and profit shares of the parties and the responsiveness of joint ventures to national development goals some of the results apply to wholly owned subsidiaries of transnational corporations local firms and licensing arrangements which emerge as special cases

optimal maturity of government debt without state contingent bonds abstract this paper shows that state contingent debt can be synthetically constructed using non contingent debt of different maturities a main policy implication of this principle is that the ramsey allocation with complete markets can be sustained with non contingent debt only by properly managing its maturity structure the numerical experiments however suggest that this policy implication ought to be taken with care we find that the debt positions that sustain the ramsey allocation are very high on the order of a few hundred times total gdp for a very simple four state economy and increasing in the number of states in addition they are very sensitive to small variations in the parameters of the model

macroeconomic forecasting using pooled international data in a recent article garcia ferrer highfield palm and zellner 1987 used pooling techniques to forecast annual output growth rates in nine countries examining various model specifications they found that among the fixed parameter models investigated a third order autoregressive ar model with leading indicators ar 3 li produces the best forecasts overall a reexamination using state space methods shows that a more parsimonious fixed parameter model which does not have an autoregressive part leads generally to better forecasts than the fixed parameter ar 3 li model

price level determinacy with an interest rate policy rule and rational expectations abstract this paper reconsiders a result obtained by sargent and wallace namely that price level indeterminacy obtains in their model if the monetary authorities adopt a feedback rule for the interest rate rather than the money stock it is shown that the indeterminacy vanishes if the interest rate rule is chosen so as to have a desired effect on the expected quantity of money demanded this holds even if considerable weight is given in the choice of a rule to the aim of smoothing interest rate fluctuations

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

transactions cost economics and the multinational enterprise an assessment abstract this paper applies transactions cost principles to the multinational enterprise in order to ascertain its distinctive properties as a mode of economic organization the analysis helps identify just when and where contractual alternatives to the multinational firm are likely to be viable this turns out to depend upon the nature of the technology the regime of appropriability within which the firm operates and the characteristics of the markets in question transactions cost analysis is also extended to the multinational enterprise host country relationship implications for management and public policy are derived

comment on using a long term interest rate as the monetary policy instrument abstract the use of a long term interest rate as the instrument of monetary policy would not have the advantage sometimes claimed for it of relaxing the constraint on what can be achieved by monetary policy when the zero lower bound on short term interest rates is reached the proposal would also seem an impractical one to implement

multinational firms acquisitions and job tasks we revisit the question how inward fdi and multinational ownership affect relative labor demand motivated by the recent literature that distinguish between skills and tasks we argue that the impact of multinational and foreign ownership on the demand for labor is better captured by focusing on job tasks rather than education we use swedish matched employer employee data and find that changes of local firms to both foreign and swedish multinationals increase the relative demand for non routine and interactive job tasks in the targeted local firms hence in a high income country both inward and outward fdi have a task upgrading impact on local firms the effect is primarily driven by wage effects leading to increased wage dispersion for workers with different non routine and interactive task intensity we also show that the effect is not the same as skill upgrading since dividing employees by educational attainment does not capture changes in the relative labor demand hence our results suggest a new aspect of the labor market consequences of fdi less

the perils of taylor rules abstract since john taylor s 1993 carnegie rochester conf ser publ policy39 195 214 seminal paper a large literature has argued that active interest rate feedback rules that is rules that respond to increases in inflation with a more than one for one increase in the nominal interest rate are stabilizing in this paper we argue that once the zero bound on nominal interest rates is taken into account active interest rate feedback rules can easily lead to unexpected consequences specifically we show that even if the steady state at which monetary policy is active is locally the unique equilibrium typically there exist an infinite number of equilibrium trajectories originating arbitrarily close to that steady state that converge to a liquidity trap that is a steady state in which the nominal interest rate is near zero and inflation is possibly negative journal of economic literature classification numbers e52 e31 e63

multinationals cross border acquisitions and wage dispersion we examine the impact of cross border acquisitions on intra firm wage dispersion using a detailed swedish linked employer employee data set including data on all firms and about 50 of the swedish labour force with information on job tasks and education foreign acquisitions of domestic multinationals and local firms increase wage dispersion but so do also other types of cross border acquisitions hence it is the acquisition itself rather than foreign ownership that increases wage dispersion the positive wage effect is concentrated to ceos and other managers whereas other groups are either negatively affected or not affected at all

firm ownership preferences and host government restrictions an integrated approach two approaches may explain how multinational enterprises mnes select ownership structures for subsidiaries the first argues that mnes prefer structures that minimize that transaction costs of doing business abroad the second argues that ownership structures are determined by negotiations with host governments whose outcomes depend on the bargaining power of the firm this paper presents a framework integrating these two approaches and uses statistical methods to separate their effects empirically

technology transfer and spillovers does local participation with multinationals matter this paper examines the effects on technology transfer and spillovers deriving from ownership sharing of foreign multinational affiliates more specifically we try to answer two questions using unpublished indonesian micro data firstly do establishments with minority and majority ownership differ in terms of productivity levels secondly does the degree of spillover differ with the degree of ownership in the fdi our results show that foreign establishments have comparable high levels of labor productivity and that domestic establishments benefit from spillovers however the degree of foreign ownership does neither affect the level of labor productivity in foreign establishments nor the degree of spillovers

is there really a foreign ownership wage premium evidence from matched employer employee data numerous studies on firm level data have reported higher average wages in foreign owned firms than in domestically owned firms this however does not necessarily imply that the individual worker s wage increase with foreign ownership using detailed matched employer employee data on the entire swedish private sector we examine the effect of foreign ownership on individual wages controlling for individual and firm heterogeneity as well as for possible selection bias in foreign acquisitions we distinguish between foreign greenfields and takeovers and compare foreign owned firms with both domestic multinationals and local firms our results show a considerably smaller wage premium in foreign owned firms than what has been found in studies conducted at a more aggregate level moreover foreign takeovers of swedish firms tend to have no or even a negative effect on wages

the effectiveness of alternative monetary policy tools in a zero lower bound environment this paper reviews alternative options for monetary policy when the shortterm interest rate is at the zero lower bound and develops new empirical estimates of the effects of the maturity structure of publicly held debt on the term structure of interest rates we use a model of risk averse arbitrageurs to develop measures of how the maturity structure of debt held by the public might affect the pricing of level slope and curvature term structure risk we find that these treasury factors historically were quite helpful for predicting both yields and excess returns over 1990 2007 the historical correlations are consistent with the claim that if in december 2006 the fed were to have sold off all its treasury holdings of less than 1 year maturity about 400 billion and use the proceeds to retire treasury debt from the long end this might have resulted in a 14 basis point drop in the 10 year rate and an 11 basis point increase in the 6 month rate we also develop a description of how the dynamic behavior of the term structure of interest rates changed after hitting the zero lower bound in 2009 our estimates imply that at the zero lower bound such a maturity swap would have the same effects as buying 400 billion in long term maturities outright with newly created reserves and could reduce the 10 year rate by 13 basis points without raising short term yields