monetary policy rules in the open economy effects on welfare and business cycles abstract this paper computes welfare maximizing taylor style interest rate rules in a business cycle model of a small open economy the model assumes staggered price setting and shocks to domestic productivity to the world interest rate to world inflation and to the uncovered interest rate parity condition optimized policy rules have a pronounced anti inflation stance and entail significant nominal and real exchange rate volatility the country responds to an increase in external volatility by holding more foreign assets the policy rule affects the variance and the mean of consumption the effect on the mean matters significantly for welfare

exchange rate volatility and export growth in nigeria this article examines the impact of exchange rate volatility on nigeria s exports to its most important trading partner the united states over the quarterly period january 1980 to april 2001 using cointegration and vector error correction vecm framework empirical tests indicate the presence of a unique cointegrating vector linking real exports real foreign income relative export prices and real exchange rate volatility in the long run furthermore the results show that increases in the volatility of the real exchange rate raise uncertainty about profits to be made which exert significant negative effects on exports both in the short and long run our results also show that improvements in the terms of trade represented by declines in the real exchange rate and real foreign income exert positive effects on export activity most importantly we found that the trade liberalization and economic reform policies implemented in the post 1986 structural adjustment period contributed to nigeria s export

corporate sustainability toward a theoretical integration of catholic social teaching and the natural resource based view of the firm even though management scholars have offered several views on the process of corporate sustainability these efforts have focused mainly on the technical aspects of sustainability while omitting the fundamental role played by individual moral competences therefore previous work offers an incomplete and somewhat reductionist view of corporate sustainability in this article we develop a holistic framework of corporate sustainability in which both the moral and technical aspects of sustainability are considered we do so by integrating the ethical normative perspective of the catholic social teaching cst with the competitive view of the natural resource based view this framework highlights the importance of cst principles and ideas in developing executive moral competences such as moral sensitivity and awareness and moral cognition and motivation moral competences in turn influence the organizational selection of environmental strategies giving leaders the intrinsic motivation to promote both a longer term stance on corporate sustainability efforts and a relentless search for greener business models such strategies move the firm closer towards achieving environmental sustainability hence by bridging the individual normative ethical with the organizational implementational levels of corporate sustainability our framework provides a more realistic coherent and complete perspective on the complex process of achieving corporate sustainability

welfare and public policy the role of internationalized production i introduction micro foundations of the new open macroeconomics framework see lane 2001 for a comprehensive survey provide a well grounded welfare criterion to evaluate public policies contributions in this line of research suggest that whether a monetary or a fiscal innovation is detrimental or beneficial in terms of national welfare depends on various characteristics of the world economy under consideration 1 the complexity of this problem warrants further investigation on economic features along this line of research to sort out policy implications in this article i focus on a prevalent feature of the real world firms hiring both domestic and foreign production factors to produce national goods and call it internationalized production 2 production factors contribute to foreign production through various ways of globalized production processes for instance a country can utilize foreign factors through importing intermediate goods and firms can directly hire foreign production factors through establishing foreign owned firms and foreign direct investment abroad 3 the extent of internationalized production is not easy to measure however yet empirical evidence indicates that its scale and importance have been on the rise in recent years for many countries table 1 shows the imported inputs as a share of the value of production for selected countries computed by campa and goldberg 1997 in all the four countries except japan the shares of imported inputs have increased considerably in the last two decades hummels et al 1998 consider the imported inputs that are used to manufacture goods for export they call the trade of these inputs vertical trade table 2 summarizes some of their results although vertical trade accounts for a relatively small fraction of total trade as shown in the second and the third columns its contribution to total export growth as shown in the fifth column far exceeds its share of total trade in all countries except japan indicating its increasing importance in particular for canada and the netherlands almost 50 of the growth of exports from the first to the last year in the sample are due to growth in vertical trade table 3 taken from jungnickel and keller 2003 presents the scales of sales and employment of foreign owned firms in selected countries and years in the listed countries the sales and employment in percentage of the respective values for total manufacturing increase from 1985 to 1998 except in japan and italy the figures for germany are quite stable over time in particular foreign owned firms employed more than a quarter of the total employment in the manufacturing sectors of france and belgium in the year 1998 as demonstrated the factor markets have been increasingly connected across borders in production and it is therefore important to investigate the implications of public policies to the world economy in which internationalized production matters in this article i incorporate internationalized production into the model of corsetti and pesenti 2001 denoted cp hereafter and investigate its role played on the welfare effects of public policies this model generates many welfare implications different from cp s in particular an expansionary monetary shock can be beggar thy neighbor and a fiscal shock can improve national welfare in this model the ranges of parameter values which give rise to different welfare outcomes are derived i also derive the transmission mechanism of public policy which is quite different from theirs in particular in this model a fiscal shock affects the exchange rate and produces long run welfare effects even if it is temporary it is shown that internationalized production may not only cause tensions between countries but also widen the welfare gap between citizens in a country this opens up a discussion on the issues of international retaliation and coordination which i will discuss in the concluding remarks

some empirical evidence on the effects of shocks to monetary policy on exchange rates this paper investigates the effects of shocks to u s monetary policy on exchange rates we consider three measures of these shocks orthogonalized shocks to the federal funds rate orthogonalized shocks to the ratio of nonborrowed to total reserves and changes in the romer and romer index of monetary policy in sharp contrast to the literature we find substantial evidence of a link between monetary policy and exchange rates specifically according to our results a contractionary shock to u s monetary policy leads to i persistent significant appreciations in u s nominal and real exchange rates and ii significant persistent deviations from uncovered interest rate parity in favor of u s interest rates

volatility and irish exports we analyse the impact of volatility per se on real exports for a small open economy concentrating on irish trade with the uk and the us an important element is that we take account of the time lag between the trade decision and the actual trade or payments taking place by using a flexible lag approach rather than adopt a single measure of risk we also adopt a spectrum of risk measures and detail varied size characteristics and statistical properties we find that the ambiguous results found to date may be due to not taking account of the timing effect which varies substantially depending on which volatility measure is used

monetary union price level convergence and inflation how close is europe to the usa abstract the pattern of price dispersion across european and us cities from 1990 to 2004 is documented there is a striking decline in dispersion for traded goods prices in europe most of which took place prior to the launch of the euro dispersion in the euro area is now quite close to that of the usa this evidence provides useful facts for future work assessing the importance of various developments in europe harmonization of tax rates convergence of incomes and labor costs liberalization of trade and factor markets and increased coherence of monetary policy

real exchange rates and relative prices an empirical investigation abstract this paper uncovers a striking empirical regularity the consumer price of a good relative to a different good within a country tends to be much less variable than the price of that good relative to a similar good in another country this fact seems to hold for all goods except very simple homogeneous products models of real exchange rates are likely to have predictions regarding this relation so this fact may provide a useful gauge for discriminating among models

the choice of monetary instrument in two interdependent economies under uncertainty abstract this paper analyzes the choice of monetary instrument in a stochastic two country setting where each country s set of monetary policy instruments include both the money supply and the interest rate it shows how the optimal choice of instrument is determined in two stages first for each pair the minimum welfare costs for each economy is determined this defines a pair of payoff matrices and the second stage involves determining the nash equilibrium for this bimatrix game in our illustrative example for the alternative shocks considered a dominant nash equilibrium is always obtained

secrecy signalling and the accuracy of expectations during the borrowed reserves operating regime abstract this paper demonstrates that the information in the undisclosed federal open market committee fomc policy directive is not completely incorporated into the yield curve one day before fomc meetings but is incorporated one day after meetings during the borrowed reserves operating regime these results suggest that monetary policy changes are informally but effectively disclosed to market participants through signals from the open market desk these findings indicate that the legislation before congress that would mandate the immediate release of the fomc policy directive would have had little impact on the accuracy of financial market expectations over the sample

interest rate volatility and home mortgage loans the us economy has experienced substantial fluctuations in real and nominal interest rates since the 1970s this article investigates empirically the relationship between home mortgage loans and volatility in mortgage rates for the period 1971 02 to 2003 03 contrary to common wisdom we find a positive relationship between mortgage rate volatility and home mortgage loans further investigation indicates that this is due to volatility in the bond market in times of high interest volatility households disinvest in government securities and invest in real assets which yields a positive relationship between mortgage rate volatility and home mortgage loans

the impact of monetary union on macroeconomic integration evidence from west africa data from 19 african nations is used to investigate the hypothesis that monetary union represented in this case by the cfa franc zone augments the extent of macroeconomic integration the paper covers two key dimensions of integration the volume of bilateral trade and the magnitude of cross country business cycle correlation restricting our attention to a part of the world in which for historical reasons monetary union membership is exogenous to economic characteristics we can test whether the large single currency effects claimed by a rose apply within a sample of less developed countries

on the sensitivity of the volume and volatility of bilateral trade flows to exchange rate uncertainty we present an empirical investigation of the hypotheses that exchange rate uncertainty may have an impact on both the volume and variability of trade flows by considering a broad set of industrial countries bilateral real trade flows over the period 1980 1998 similar to the findings of earlier theoretical and empirical research our first set of results shows that the impact of exchange rate uncertainty on trade flows is indeterminate our second set of results provides new and novel findings that exchange rate uncertainty has a consistent positive and significant effect on the volatility of bilateral trade flows helping us better understand macroeconomic volatility jel f17 f31 c22

does central bank transparency impact financial markets a cross country econometric analysis blinder et al 2001 argues that more open public disclosure of central bank policies may enhance the efficiency of markets we examine this claim by studying for a set of seven industrialized countries whether selected central banks moves toward more open disclosure during the 1990s improved or worsened the predictability of the corresponding national financial markets employing methodologies analogous to campbell and schiller 1991 we find that for all countries the forecasting error has decreased for interest rates on the respective government bonds across most maturity lengths and that the expectations hypothesis has generally performed better at the short end of the yield curve our results also tentatively show that the effects are stronger for central banks that made the move to greater disclosure compared to those banks that resisted increasing the public s information set these findings are consistent with tabellini s 1987 view that central bank secrecy will hinder the smooth functioning of financial markets

exchange rate pass through exchange rate volatility and exchange rate disconnect abstract this paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass through from changes in exchange rates to consumer prices exchange rates may be highly volatile because in a sense they have little effect on macroeconomic variables the paper shows the ingredients necessary to construct such an explanation for exchange rate volatility in addition to the presence of local currency pricing we need a incomplete international financial markets b a structure of international pricing and product distribution such that wealth effects of exchange rate changes are minimized and c stochastic deviations from uncovered interest rate parity together it is shown that these elements can produce exchange rate volatility that is much higher than shocks to economic fundamentals and disconnected from the rest of the economy in the sense that the volatility of all other macroeconomic aggregates are of the same order as that of fundamentals

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

an exploration in the theory of exchange rate regimes three exchange rate regimes a float a one sided peg and a cooperative peg are evaluated and compared in terms of efficiency and welfare levels the framework of analysis embodies country specific monies with the money of each country being used to transact in its commodity markets and its currency denominated bonds welfare levels depend only on consumption levels in the presence of perfect foresight all equilibrium allocations are pareto efficient in a floating exchange rate regime the perfect foresight equilibrium allocation coincides with an equilibrium of a costless barter economy the same result holds in a one sided peg if the pegging country s exchange rate stabilizing authority breaks even over time in a cooperative peg regime there is a different equilibrium allocation for each combination of exchange rate levels and monetary policies problems of policy coordination and conflicts in desired monetary policies are discussed

inflation targeting rules and welfare in an asymmetric currency area abstract this paper studies the effect on monetary policy of differing degrees of competition and differing degrees of nominal rigidity between the members of a monetary union in particular we assess the welfare loss brought about by the use of a simple interest rate rule that does not take into account such structural differences our results show that ceteris paribus to maximize welfare the central bank should react more strongly to inflation pressure generated by the more competitive economies our work extends the results of benigno benigno p 2004 optimal monetary policy in a currency area journal of international economics 63 293 320 by showing that if the degree of competition differs between countries the optimal rule could involve placing a greater weight on the more flexible countries our study suggests that the size of the welfare losses generated by failure to take account of these asymmetries depends crucially on the actual combination of the various asymmetries as a consequence we show that if the optimal weights are chosen under incomplete information regarding the extent and type of asymmetries the resulting level of welfare could be lower than that produced by the symmetric rule

why interest rates rise when an unexpectedly large money stock is announced ment of an unexpectedly large growth in the money supply will lead to an immediate increase in interest rates this announcement effect is often taken as confirmation of the monetarist view that the way to bring down interest rates even in the short run is to reduce the rate of money growth in this paper we provide an alternative explanation of the announcement effect that is consistent with the keynesian view that in the short run the way to bring down interest rates is to expand the money supply we do not address the issue of inflationary expectations in a formal way though in the long run we would expect the well known fisher effect to hold looking closely at the announcement effect it is clear that whatever may be the true short run relationship between money growth and interest rates it cannot be inferred from a simple correlation of announcements of changes in the money stock with the resulting changes in interest rates this is because of several properties of the announcement phenomenon that we capture in the model

price stability in open economies this paper studies the conditions under which price stability is the optimal policy in a two country open economy model with imperfect competition and price stickiness special conditions on the levels of country specific distortionary taxation and the intratemporal and intertemporal elasticities of substitution need to be satisfied these restrictions apply to both cooperative and non cooperative settings most importantly we show that cooperative and non cooperative solutions do not coincide despite market completeness and producer currency pricing in this framework our analysis suggests a role for international policy coordination

currencies and the allocation of risk the welfare effects of a monetary union in a general equilibrium model with incomplete asset markets nominal securities and mean variance preferences a monetary union is desirable when the gain from eliminating excess volatility of nominal variables exceeds the cost of reducing the number of currencies with which to hedge risks copyright 1998 by american economic association

from the marketplace to the dinner plate the economy theology and factory farming factory farming is big business since the products of factoryfarming are living breathing sentient creatures particular ethical issues are raised in a market system based on efficiency productivity costs of production and profit this paper focuses on the question of weather food animals in the american market system are subjected to unnecessary pain and suffering before they make it to our dinner plates the single most important consideration then is an exploration of the extent to which economic considerations render factory farming not only lucrative but also necessary under present market conditions the concern for unnecessary suffering moves the paper into an exploration of the extent to which the practices and effects of factory farming raise spiritual concerns which believers ought to address

how well have social economy financial institutions performed during the crisis period exploring financial and social efficiency in spanish credit unions as social economy financial institutions credit unions have traditionally been considered less efficient than traditional banking entities however like banks and savings banks they have to be as efficient and competitive as possible to survive in today s business environment especially at times of crisis to date there have been very few studies on their efficiency and practically none for the crisis period moreover almost all the existing studies assess only financial efficiency without considering their social function this study examines the levels of both financial and social efficiency in spanish credit unions as well as their main determinants during the recent crisis we apply the two stage double bootstrap data envelopment analysis dea methodology based on panel data corresponding to all the credit unions active in spain between 2008 and 2013 the empirical results indicate that financial and social efficiency achieved an acceptable level although on average the former was slightly greater than the latter we also find that both age and merger and acquisition activity were positively influential on the financial efficiency of credit unions but had a significant negative effect on their social efficiency moreover the regional location of such entities and the financial crisis were also crucial determinants of both types of efficiency our findings are therefore useful for all the stakeholders of credit unions to know if these entities have been efficient according to a double bottom line accounting in the crisis period and hence to maintain successful social management that is compatible with satisfactory financial efficiency

income money ethic pay satisfaction commitment and unethical behavior is the love of money the root of evil for hong kong employees this study examines a model involving income the love of money pay satisfaction organizational commitment job changes and unethical behavior among 211 full time employees in hong kong china direct paths suggested that the love of money was related to unethical behavior but income money was not indirect paths showed that income was negatively related to the love of money that in turn was negatively related to pay satisfaction that in turn was negatively associated with unethical behavior pay satisfaction was positively related to organizational commitment thus the love of money is the root of evil but money is not

u s monetary regimes and optimal monetary policy in the euro area monetary policy in the united states has been documented to have switched from reacting weakly to inflation fluctuations during the 1970s to fighting inflation aggressively from the early 1980s onward in this paper i analyze the impact of the u s monetary policy regime switches on the eurozone i construct a new keynesian two country model where foreign u s monetary policy switches regimes over time i estimate the model for the u s and the euro area using quarterly data and find that the united states has switched between those two regimes in line with existing evidence i show that foreign regime switches affect home eurozone inflation and output volatility and their responses to shocks substantially as long as the home central bank commits to a time invariant interest rate rule reacting to domestic conditions only optimal policy in the home country instead requires that the home central bank reacts strongly to domestic producer price inflation and to international variables such as imported goods relative prices in fact i show that currency misalignments and relative prices play a crucial role in the transmission of foreign monetary policy regime switches internationally interestingly i show that only marginal gains arise for the euro area when the european central bank ecb adjusts its policy according to the monetary regime in the united states thus a simple time invariant monetary policy rule with a strong reaction to producer price index ppi inflation and relative prices is enough to counteract the effects of monetary policy switches in the united states

reconsidering the common good in a business context in our contemporary post modern context it has become increasingly awkward to talk about a good that is shared by all this is particularly true in the context of mammoth multi national corporations operating in global markets nevertheless it is precisely some of these same enormous aggrandizing forces that have given rise to recent corporate scandals these in turn raise questions about ethical systems that are focused too myopically on self interest or the interest of specific groups locations or cultures the obvious traditional alternative to moral bellybutton gazing is the common good which challenges the modern business enterprise to realize non instrumental values that can only be attained in our life together the common good dictates that leadership should be judged first of all according to moral criteria rather than professional competence it helps correct the distorted prioritization of the maximization of profit in every business decision recognizing that businesses have a multitude of rights and responsibilities and the common good reminds us that the first of these is not always profit making

the effects of macroeconomic stability on foreign trade an analysis for spain 1986 2000 two main factors underlie the rebirth of interest in the study of the influence of the real exchange rate on trade the reduction of its volatility and the current trend towards price stability the objective of this study is to analyse the effects of the process of nominal convergence required of the european member states for the fulfilment of monetary integration on foreign trade flows the case of spain which is especially interesting in this context is studied for the period 1986 to 2000 the results of estimating the aggregate functions of the export and import of goods shows how macroeconomic stability has altered the behaviour of trade with respect to the two basic determinants income and prices how it has caused a significant structural change in the real exchange rate and finally how it has laid the explanatory bases for transactions in the twenty first century with the single currency the euro

international trade and exchange rate volatility for currencies with well developed forward markets several papers have investigated the conjectured negative relationship between trade and short term exchange rate volatility without being very successful a theoretical explanation for the empirical anomalies is provided by solving explicitly for the forward rate because importers and exporters are on opposite sides of the forward market so is their exposure towards exchange rate volatility moreover which trade flow benefits and which one loses from increased volatility is determined by the signs of the aggregate net foreign currency exposure and the aggregate measure of risk aversion

monetary integration uncertainty and the role of money finance this paper considers the positive theory of monetary integration in a general equilibrium monetary model a role for money finance is presented which optimally reduces consumption variability when asset markets are incomplete importantly this role is independent of the aggregate money stock and so does not restrict inflation policy

exchange rate policy and endogenous price flexibility most theoretical analysis of exible vs flxed exchange rates takes the degree of nominal rigidity to be independent of the exchange rate regime choice itself but informal policy discussion often suggests that a credible exchange rate peg may increase internal price exibility this paper explores the relationship between exchange rate policy and price exibility in a model where price exibility itself is an endogenous choice of proflt maximizing flrms a flxed exchange rate can afiect the optimal degree of price exibility by altering the volatility of nominal demand facing price setting flrms we flnd that a unilateral peg such as a currency board adopted by a single country will increase internal price exibility perhaps by a large amount on the other hand when an exchange rate peg is supported by bilateral participation of all monetary authorities such as in a monetary union price exibility may actually be less than under freely oating exchange rates quantitatively we flnd that the endogenous increase in price exibility following a unilateral peg might be big enough that output volatility is no greater than it would be under a oating exchange rate regime

global implications of self oriented national monetary rules author s obstfeld maurice rogoff kenneth abstract it is well known that if international linkages are relatively small the potential gains to international monetary policy coordination are typically quite limited but what if goods and financial markets are tightly linked is it then problematic if countries unilaterally design their institutions for monetary stabilization are the stabilization gains from having separate currencies largely squandered in the absence of effective international monetary coordination we argue that under plausible assumptions the answer is no unless risk aversion is very high lack of coordination in rule setting is a second order problem compared to the overall gains from monetary policy stabilization

a resource based perspective on corporate environmental performance and profitability drawing on the resource based view of the firm we posited that environmental performance and economic performance are positively linked and that industry growth moderates the relationship with the returns to environmental performance higher in high growth industries we tested these hypotheses with an analysis of 243 finns over two years using independently developed environmental ratings results indicate that it pays to be green and that this relationship strengthens with industry growth we conclude by highlighting the study s academic and managerial implications making special reference to the social issues in management literature

secrecy of monetary policy and the variability of interest rates this paper addresses the issue of how secrecy of the short run monetary policy objectives affects the behavior of the federal funds rate secrecy is modeled by assuming that financial markets are unc ertain about a parameter in the federal reserve reaction function th ey learn over time about this parameter by means of bayes rule and this learning process is reflected in the time path of interest rates and of reserve aggregates the main result of the paper is that secr ecy tends to increase the volatility of the funds rate and of reserve aggregates copyright 1987 by ohio state university press

the effects of real exchange rate risk on international trade abstract by assuming real profit maximization and uncertain prices as well as exchange rates we conclude that it is uncertain percentage changes in the real exchange rate that are risky in international trade empirical estimation of fourteen bilateral trade flows among industrialized countries finds a significant negative effect on trade quantity from such risk in a number of these cases the expectation variable has a positive effect in a larger number of cases significant price effects from the expectation variable are fewer and from risk are negligible

legal vs normative csr differential impact on analyst dispersion stock return volatility cost of capital and firm value this study examines how the sell side analysts interpret firms corporate social responsibility csr activities specifically we examine the differential impact of overall legal and normative csr on the analysts earnings forecast dispersion stock return volatility cost of equity capital and firm value employing a sample of u s public firms during 1993 2009 we find that overall csr intensities reduce analyst dispersion of earnings forecast volatility of stock return and cost of capital coc and increase firm value however its impact is reduced for firms with better accounting and disclosure quality when we disaggregate csr into legal and normative csr we find that legal normative csr decreases increases analysts dispersion stock return volatility and coc while legal normative csr increases decreases firm value the sell side analysts tend to have less greater information asymmetry regarding the net benefits of pursuing csr that is not required by laws we find however that the benefit of having normative csr realized in 1 year lag such that analyst dispersion stock return volatility coc decrease respectively and firm value increases furthermore we find that the benefit of normative csr is offset for firms with higher accounting and disclosure quality

real exchange rate volatility and international trade a reexamination of the theory one of the issues that have received considerable attention in the comparison of the properties of alternative exchange rate regimes is the effect of exchange rate risk on the volume of trade it has been argued that the higher volatility of exchange rates witnessed since the adoption of the floating regime in 1973 has led to a decrease in international trade transactions this is because most trade contracts are not for immediate delivery of goods and since they are denominated in terms of the currency of either the importer or the exporter unanticipated fluctuations in the exchange rate affect realized profits and hence the volume of trade it is implicitly assumed that forward exchange markets that can help traders eliminate this type of variations in profits either are not available as it is true for the majority of currencies because most are not fully convertible thereby impairing forward markets or for some reason they are not utilized to fully hedge exchange risk present in trade transactions the empirical evidence regarding the effect of exchange rate risk on trade has at best been inconclusive the large majority of the empirical studies are unable to establish a systematically significant link between exchange rate variability and the volume of international trade whether on an aggregate or on a bilateral basis abrams 1 akhtar and hilton 2 cushman 4 5 6 and kenan and rodrik 12 find some significant negative effects of exchange volatility on exports however bailey tavlas and uhlan 3 hooper and kohlhagen 10 and an international monetary fund study 11 do not find any supporting evidence for the depressing effect of exchange rate volatility on international trade it is also interesting to note that in many of these studies a significant positive effect of exchange rate volatility on the volume of trade is found for some cases however the positive effect believed to be at odds with the theory was either ignored or dismissed as a perverse result since as far as volumes are concerned theoretical considerations

welfare and macroeconomic interdependence we develop a baseline model of monetary and fiscal transmission in interdependent economies the welfare effects of expansionary policies are related to monopolistic supply in production and monopoly power of a country in trade an unanticipated exchange rate depreciation can be beggar thyself rather than beggar thy neighbor as gains in domestic output are offset by deteriorating terms of trade smaller and more open economies are more prone to suffer from inflationary shocks larger economies benefit from moderate demand led expansions but may be worse off if policy makers attempt to close the output gap fiscal shocks are generally beggar thy neighbor in the long run in the short run they raise domestic demand at given terms of trade thus reducing the welfare benefits from monetary expansions analytical tractability makes our model uniquely suitable as a starting point to approach the recent new open economy macroeconomic literature

central banks and macroeconomic policy choices relaxing the trilemma abstract macroeconomic policy choices in open economies are constrained by the trilemma according to which the objectives of exchange rate stability monetary independence and capital mobility cannot be attained jointly this paper shows that foreign exchange interventions provide an effective instrument to relax the trilemma an active reserve policy allows central banks to pursue independent monetary and exchange rate policies when the capital account is liberalised we use the framework of the portfolio balance model to show that exchange market interventions may substitute for capital controls both allow a country to achieve the other two objectives of the trilemma our empirical analysis of a large country panel data set covering the period 1970 2010 confirms this theoretical insight the weighted sum of the three trilemma objectives increases in the degree of foreign exchange market intervention the capacity to relax the trilemma constraint has increased over time and has been most effective in emerging markets

effects of tobin taxes in minority game markets we show that the introduction of tobin taxes in agent based models of currency markets can lead to a reduction of speculative trading and reduce the magnitude of exchange rate fluctuations at intermediate tax rates in this regime revenues for the market maker obtained from speculators are maximal we here focus on minority game models of markets which are accessible by exact techniques from statistical mechanics results are supported by computer simulations our findings suggest that at finite systems sizes the effect is most pronounced in a critical region around the phase transition of the infinite system but much weaker if the market is operating far from criticality and does not exhibit anomalous fluctuations

exchange rate regimes and international trade evidence from the classical gold standard era in this paper we show that the spread of the classical gold standard in the late nineteenth century increased international trade flows this positive effect was compounded whenever a group of countries formed a monetary union applying the gravity model of trade to more than 1 100 country pairs during the 1870 1910 period we find that two countries on gold would trade 60 percent more with each other than with countries on a different monetary standard moreover a monetary union would more than double bilateral trade flows our findings are relevant for current discussions on alternative monetary arrangements for the twenty first century

foreign exchange intervention in emerging markets a survey of empirical studies nowadays foreign exchange interventions occur in emerging market economies whereas empirical studies on interventions mainly refer to advanced economies however interventions in emerging markets are different from those in advanced economies they occur regularly and central banks have considerable leverage derived from relatively high reserves some non sterilisation the central bank s information advantage and capital controls consequently these interventions often successfully impact the level and volatility of exchange rates nevertheless more research on interventions in emerging markets is needed analysing the influence of heterogeneous institutional circumstances examining the role of central bank communication and using high frequency data

foreign money shocks and the welfare performance of alternative monetary policy regimes the welfare properties of monetary policy regimes for a country subject to foreign money shocks are examined in a two country sticky price model money targeting is found to be welfare superior to a fixed exchange rate when the expenditure switching effect of exchange rate changes is relatively weak but a fixed rate is superior when the expenditure switching effect is strong however price targeting is superior to both these regimes for all values of the expenditure switching effect a welfare maximising monetary rule yields lower output and exchange rate volatility than price targeting for a wide range of parameter values

pass through of exchange rates and competition between floaters and fixers this paper studies how a rise in the share of u s imports from china or any country with a fixed exchange rate could disproportionately lower pass through of exchange rates to u s import prices we develop a theoretical model showing how changes in the competitive environment induce exporters from other countries to lower markups in response to a dollar depreciation thereby moderating pass through the model indicates that a particular local bias condition is necessary for this effect and that free entry amplifies it the model also produces an approximately log linear structural equation for pass through regressions including the china share panel regressions over 1993 2006 indicate that the rising share of trade from china or from all countries with fixed exchange rates can explain a decline in pass through by about onefifth of its size

the stakeholder theory and the common good the theory of the social responsibility of the firm oscillates between two extremes one that reduces the firm s responsibility to the obtainment of the greatest possible profit for its shareholders and another that extends the firm s responsibility to include a wide range of actors with an interest or stake in the firm the stakeholder theory of the social responsibility of business is more appealing from an ethical point of view and yet it lacks a solid foundation that would be acceptable to a variety of schools of thought in this paper i argue that the stakeholder theory could be founded on the concept of the common good first i explain the foundations of the theory of the common good the concept itself how it relates to the individual good and its role in the firm following that i explain how the theory of the common good could be applied to the stakeholder theory finally i draw some conclusions

relative prices and expenditure switching effect this study examines the impact of a monetary shock on a two country asymmetrical size general equilibrium model it is assumed that prices are sticky in the producer s currency and find that the expenditure switching effect is not significant

central bank independence revisited the case for central bank independence cbi while not a new one has been strengthened by a growing body of empirical evidence by recent developments in economic theory and by the temper of the times the case is a strong one 1 which is becoming part of the washington orthodoxy the purposes of this paper are both to make more precise the type of cbi that is likely to enhance economic performance and to point to some remaining open issues and anomalies i start with the two theoretical approaches to cbi

profit and more catholic social teaching and the purpose of the firm the empirical findings in collins and porras study of visionary companies built to last and the normative claims about the purpose of the business firm in centesimus annus are found to be complementary in understanding the purpose of the business firm a summary of the methodology and findings of built to lastand a short overview of catholic social teaching are provided it is shown that centesimus annus claim that the purpose of the firm is broader than just profit is consistent with collins and porras empirical finding that firms which set a broader objective tend to be more successful than those which pursue only the maximization of profits it is noted however that a related finding in collins and porras namely that the content of the firm s objective is not as important as internalizing some objective beyond just profit maximization can lead to ethical myopia two examples are provided of this the walt disney company and philip morris centesimus annus offers a way to expose such myopia by providing guidance as to what the purpose of the firm is and therefore as to what kinds of objectives are appropriate to the firm

central bank secrecy interest rates and monetary control we construct a dynamic rational expectations model of the federal funds and deposit market that provides a rationale for central bank secrecy about current monetary aggregate objectives in this analysis the trading desk values secrecy because it reduces the influence of monetary control policy on interest rates we then examine actual u s experience with monetary control and determine that the reserve bias predicted by the model is present in the data from 1978 to 1985 finally we demonstrate that central bank secrecy may not lower the value of commercial banks

exchange rates and traded goods prices abstract this paper presents a partial equilibrium model of the determination of domestic and export prices by a monopolistic competitive firm the model stresses the role of exchange rate uncertainty and expectations the most important result of the analysis is that the stochastic properties of deviations from the law of one price are crucially affected by the currency of denomination of export prices using data on domestic and dollar export prices of japanese goods i find that deviations from the law of one price are due to exchange rate surprises but also to price staggering and ex ante price discrimination

an assessment of the association between renewable energy utilization and firm financial performance contemporary research highlights multiple societal and environmental benefits in addition to potential economic advantages associated with renewable energy re utilization as federal and state incentives for investments in re technologies become more prevalent re sources represent increasingly viable alternatives to established fossil fuel energy re utilization is recognized as a key component of green product innovation that helps firms reduce the environmental impact of production processes and diminish their ecological footprints and energy consumption yet despite consistent evidence that corporate sustainability initiatives are favorably associated with firm performance the limited research that examines associations between re initiatives and firm performance yields mixed results and an explicit link has yet to be established drawing on the natural resource based view of the firm we examine the association between re utilization and firm financial performance over time annual roi tobin s q and operating margin for large u s firms identified as exceptional users of re in the epa s fortune 500 top green power partners list are compared with their respective industry medians over a 7 year period 2007 2013 and post hoc bootstrapping and sensitivity analyses are performed to further validate the study findings our research advances current knowledge about the influence of re utilization by demonstrating that top re user firms consistently generated superior financial performance compared to their industry competitors as such the study findings lend credence to the existence of a business case that complements the societal and environmental benefits of re utilization

a corporate balance sheet approach to currency crises this paper presents a general equilibrium currency crisis model of the third generation in which the possibility of currency crises is driven by the interplay between private firms credit constraints and nominal price rigidities despite our emphasis on microfoundations the model remains sufficiently simple that the policy analysis can be conducted graphically the analysis hinges on four main features i ex post deviations from purchasing power parity ii credit constraints a la bernanke gertler iii foreign currency borrowing by domestic firms iv a competitive banking sector lending to firms and holding reserves and a monetary policy conducted either through open market operations or short term lending facilities we derive sufficient conditions for the existence of a sunspot equilibrium with currency crises we show that an interest rate increase intended to support the currency in a crisis may not be effective but that a relaxation of short term lending facilities can make this policy effective by attenuating the rise in interest rates relevant to firms

optimal monetary and fiscal policy in a currency union we lay out a tractable model for the analysis of optimal monetary and fiscal policy in a currency union the monetary authority sets a common interest rate for the union whereas fiscal policy is implemented at the country level through the choice of government spending in the presence of country specific shocks and nominal rigidities the policy mix that is optimal from the viewpoint of the union as a whole requires that inflation be stabilized at the union level by the common central bank whereas fiscal policy has a country specific stabilization role one beyond the efficient provision of public goods

consumption real exchange rates and the structure of international asset markets abstract international real business cycle irbc models that assume complete asset markets yield strong restrictions for consumption and bilateral real exchange rate series empirical tests with data for the us japan france uk italy canada and sweden suggest that neither the trend behavior nor high frequency movements of consumption and real exchange rates are well explained by irbc models with complete markets it appears however that high frequency fluctuations of consumption and real exchange rates are consistent with unrestricted international trade in risk free bonds

the new open economy macroeconomics a survey since the 1995 publication of obsteld and rogoff s redux model there has been an outpouring of research on open economy dynamic general equilibrium models that incorporate imperfect competition and nominal rigidities this paper offers an interim survey of this recent literature 2001 elsevier science b v all rights reserved

incomplete pass through and the welfare effects of exchange rate variability abstract this paper considers the implications of incomplete exchange rate pass through for optimal monetary and exchange rate policy a two country model is presented which allows an explicit derivation of welfare functions in terms of a weighted sum of the second moments of producer prices and the nominal exchange rate from a single country perspective the optimal exchange rate variance depends on the degree of pass through the size and openness of the economy the elasticity of labour supply and the volatility of foreign producer prices welfare may be decreasing or increasing in the volatility of the exchange rate

international dimensions of optimal monetary policy abstract this paper provides a baseline general equilibrium model of optimal monetary policy among interdependent economies with monopolistic firms and nominal rigidities an inward looking policy of domestic price stabilization is not optimal when firms markups are exposed to currency fluctuations such a policy raises exchange rate volatility leading foreign exporters to charge higher prices vis a vis increased uncertainty in the export market as higher import prices reduce the purchasing power of domestic consumers optimal monetary rules trade off a larger domestic output gap against lower consumer prices optimal rules in a world nash equilibrium lead to less exchange rate volatility relative to both inward looking rules and discretionary policies even when the latter do not suffer from any inflationary or deflationary bias gains from international monetary cooperation are related in a non monotonic way to the degree of exchange rate pass through

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

macroeconomic effects of nominal exchange rate regimes new insights into the role of price dynamics abstract this paper analyzes the effects of pegged and floating exchange rates using a two country dynamic general equilibrium model that is calibrated to the us and a european aggregate the model assumes shocks to money productivity and the interest rate parity condition it captures the fact that the sharp increase in nominal exchange rate volatility after the end of the bretton woods bw system was accompanied by a commensurate rise in real exchange rate volatility but had no pronounced effect on the volatility of gdp this holds irrespective of whether flexible or sticky prices are assumed which casts doubt on the widespread view that the roughly equal post bw rise in nominal and real exchange rate volatility reflects price stickiness a flex prices variant of the model captures better the fact that the correlation between us and european gdp has been higher in the post bw era than under bw

nominal rigidity and monetary uncertainty in a small open economy temporary nominal rigidity is introduced into a dynamic stochastic general equilibrium model of a small open economy the foreign country is also modelled and is the closed economy counterpart of the domestic country we examine whether a small open economy is more vulnerable than a closed economy to uncertainty over its monetary policy a signal of an increase in future variability which was not previously foreseen as a risk by agents is shown to weaken the current exchange rate and boost current output in the small open economy in the equivalent closed economy it has no effect on current variables

excess capacity monopolistic competition and international transmission of monetary disturbances analyzes the excess capacity monopolistic competition and international transmission of monetary policy disturbances in the united states sheds light on the international impact of monetary policy emphasis on the spillover effects of monetary disturbances similarity of framework used with open economy macroeconomics

policy instrument choice and non coordinated monetary policy in interdependent economies abstract non coordinated monetary policy is analyzed in a stochastic two country general equilibrium model non coordinated equilibria are compared in two cases one where policy is set in terms of state contingent money supply rules and one where policy is set in terms of state contingent nominal interest rate rules in general the non coordinated equilibrium differs between the two types of policy rule but a number of special cases are identified where the equilibria are identical the endogenous choice of policy instrument is analyzed and the nash equilibrium in the choice of policy instrument is shown to depend on the interest elasticity of money demand

a new look at pass through abstract this paper examines the relationship between exchange rates and prices rather than assuming exchange rate changes are exogenous shocks that affect prices i use a long run restrictions var to identify shocks and explore the way domestic prices import prices and exchange rates react to a variety of shocks consumer price pass through is nearly complete in response to some shocks but low in response to others alternatively import prices and exchange rates typically respond in the same direction and pass through seems quick this supports the idea that import prices are set in the producer s currency and that lower cpi pass through is a result of changes in quantities or margins further down the supply chain

monetary rules for small open emerging economies abstract this paper develops a variant of the imf s global economic model suitable to analyze macroeconomic dynamics in open economies and uses it to assess the effectiveness of taylor rules and inflation forecast based ifb rules in stabilizing variability in output and inflation our findings suggest that a simple ifb rule that does not rely upon any direct estimates of the equilibrium real interest rate and places a relatively high weight on the inflation forecast may perform better in small open economies than conventional taylor rules

the role of intermediate goods in international monetary cooperation abstract this paper investigates the implications of intermediate goods for optimal monetary policy in open economies and particularly focuses on the welfare gains that result from monetary cooperation in a relatively standard two country dynamic stochastic general equilibrium model with input output relations this paper demonstrates that introducing intermediate goods can amplify the welfare gains caused by cost push shocks by an order of magnitude larger a detailed analysis of equilibrium dynamics highlights a new channel that is absent in the previous literature non cooperative central banks respond differently to shocks in the intermediate goods market versus shocks in the final goods market even if these shocks generate the same distortions when the two central banks cooperate furthermore it is demonstrated that increasing the degree of openness in the intermediate goods market can reduce the welfare gains from monetary cooperation this casts doubt on whether the recent trend in international economic integration justifies the potential need for international monetary cooperation

central bank secrecy fed watching and the predictability of interest rates abstract a common criticism of central bank secrecy is the assertion that it will lead to lower forecast accuracy on the part of private agents the model considered here demonstrates that reducing central bank secrecy can actually reduce the forecasting accuracy of many of the private agents in the economy when it is recognized that some agents engage in fed watching and others do not this result comes about because the interest rate process depends in part on the information that agents use in forecasting future interest rates

institutional emergence in an era of globalization the rise of transnational private regulation of labor and environmental conditions1 why have systems of transnational private regulation recently emerged to certify corporate social and environmental performance different conceptions of institutional emergence underlie different answers to this question many scholars argue that firms create certification systems to solve problems in the market a view rooted in a conception of institutions as solutions to collective action problems the author develops a different account by viewing institutions as the outcome of political contestation and by analyzing conflict and institutional entrepreneurship among a wide array of actors using a comparative case study design the analysis shows how these arguments explain the formation of social and environmental certification associations both theoretical approaches are needed but strong versions of the market based approach overlook an important set of dynamics that the author calls the political construction of market institutions the analysis shows how both problem solving in markets and

toward a common good theory of the firm the tasubinsa case tasubinsa is a special employment and occupational center constituted in accordance with spanish law where 90 of the workers have mental sensorial or physical impairments of at least 30 its positive experience of more than 15 years provides entirely different responses from mainstream neoclassical theory transaction cost theory agency theory and shareholder theory to basic questions such as what is a firm what is its purpose who owns a firm and what do a firm s owners seek the article discusses how these different premises give rise to a distinctive corporate culture centered on the handicapped person

the monetary model of the exchange rate long run relationships short run dynamics and how to beat a random walk abstract the monetary model is re examined for the sterling dollar exchange rate first it is demonstrated using a multivariate cointegration technique that an unrestricted monetary model is a valid framework for analyzing the long run exchange rate second we find once proper account has been taken of the short run data dynamics that an unrestricted monetary model outperforms the random walk and other models in an out of sample forecasting contest jel f31

uncertainty and export performance evidence from 18 countries we study a sample of nine developed and nine developing countries to evaluate the questions of how foreign income uncertainty and real exchange rate rer uncertainty impact international trade and how those impacts vary according to stage of development rer uncertainty has a negative and significant impact on export growth for six of the nine less developed countries in our sample while it has an insignificant effect for a majority of the developed countries in both groups foreign income uncertainty has a more pervasively significant and frequently larger influence on trade than does rer uncertainty

economy of mutuality merging financial and social sustainability the article posits the concept of economy of mutuality as an intellectual mediation space for shifts in emphasis between market and social structures within economic theory and practice economy of mutuality it is contended provides an alternative frame of reference to the dichotomy of market economy and social economy for inquiry about what business is for and what values it presupposes and creates the article centers around the objective of gaining a broadened understanding of business so as to include not just market economy but social enterprise and social economy in pursuit of this objective a range of various archetypes of business enterprise are considered in light of higher ends of economic life the highest telos of business encompassing all such archetypes it is argued is founded on reciprocity and integral human development the article concludes that compared to market economy per se economy of mutuality provides a better conceptual framework for business in undertaking the challenges of sustainability

transmission of nominal exchange rate changes to export prices and trade flows and implications for exchange rate policy we discuss how the welfare ranking of fixed and flexible exchange rate regimes in a new open economy macroeconomics model depends on the interplay between the degree of exchange rate pass through and the elasticity of substitution between home and foreign goods we identify combinations of these two parameters for which flexible and fixed exchange rates are superior with respect to welfare as measured by a representative household s utility level we estimate the two parameters for six non emu european countries czech republic hungary poland slovakia sweden and the uk using a heterogeneous dynamic panel approach

beyond does it pay to be green a meta analysis of moderators of the cep cfp relationship review of extant research on the corporate environmental performance cep and corporate financial performance cfp link generally demonstrates a positive relationship however some arguments and empirical results have demonstrated otherwise as a result researchers have called for a contingency approach to this research stream which moves beyond the basic question does it pay to be green and instead asks when does it pay to be green in answering this call we provide a meta analytic review of cep cfp literature in which we identify potential moderators to the cep cfp relationship including environmental performance type e g reactive vs proactive performance firm characteristics e g large vs small firms and methodological issues e g self report measures by analyzing these contingencies this study attempts to provide a basis on which to draw conclusions regarding some inconsistencies and debates in the cep cfp research some of the results of the moderator analysis suggest that small firms benefit from environmental performance as much or more than large firms us firms seem to benefit more than international counterparts and environmental performance seems to have the strongest influence on market measures of financial performance

a positive theory of foreign currency debt abstract this paper makes a case for foreign currency debt as a hedging device in an open economy subject to stochastic shocks to output a government can reduce uncertainty in wealth and in consumption by issuing foreign or domestic currency debt if unexpected domestic and foreign inflation are negatively correlated with domestic output foreign currency debt is desirable in comparison to domestic currency debt if growth rates of output of both countries are closely related and if domestic inflation is relatively uncertain it has an additional advantage if domestic debt creates time consistency problems