optimal interest rate rule in a dsge model with housing market spillovers this paper studies the optimal interest rate rule in a dsge model with housing market spillovers iacoviello and neri 2010 we find that the optimal rule responds to house price inflation even when the stabilization of house price is not among the objectives of the policymaker and that the strength of the response depends crucially on a few structural parameters

value of information in competitive economies with incomplete markets we study the value of public information in competitive economies with incomplete markets we show that generically the welfare effect of a change in the information available prior to trading can be in any direction there exist changes in information that make all agents better off and changes for which all agents are worse off in contrast for any change in information a pareto improvement is feasible that is attainable by a planner facing the same informational and asset market constraints as agents in this sense the response of competitive markets to changes in information is typically not socially optimal

ppp exchange rate rules macroeconomic in stability and learning in order to maintain competitiveness governments in developing economies seem to have pursued purchasing power parity ppp exchange rate rules by adjusting the nominal devaluation rate in response to real exchange rate deviations from an intermediate target this article shows that these rules are likely to induce macroeconomic instability as they generate sunspot driven fluctuations that are in fact learnable by agents in the expectational stability sense it finds that the existence of these learnable sunspots depends among others on open economy features including the degree of openness and the degree of exchange rate pass through to consumer s import prices

uncertainty avoidance and the preference for innovation championing roles this paper examines the preferences of 4405 individuals in forty three organizations from sixty eight different countries for four innovation championing roles the organizational maverick the network facilitator the transformational leader and the organizational buffer the study shows that the cultural value of uncertainty acceptance is significantly associated with preferences for these four championing roles it suggests that uncertainty accepting societies may be more innovative than uncertainty avoiding societies because of the greater legitimacy of those roles

consumption externalities and monetary policy with limited asset market participation this article explores the interaction between consumption externalities and limited asset market participation lamp in the standard new keynesian model we assess the performance of simple taylor type interest rate rules with respect to a equilibrium determinacy b the model s ability to simultaneously generate output and inflation volatility similar to the pre volcker era and c the model s response to a technology shock we find that when individual preferences are affected by average household consumption aggregate consumption externality stronger externalities increase the range of lamp for which multiple equilibria arise even if the policy rule satisfies the taylor principle the interaction of lamp and externalities can generate vast inflation output relative volatility in line with the one observed in the data in the 1970s according to our analysis consumption externalities also affect the responses of endogenous variables to total factor productivity shocks jel e4 e5

how forward looking is optimal monetary policy we calculate optimal monetary policy rules for several variants of a simple optimizing model of the monetary transmission mechanism with sticky prices and or wages we show that robustly optimal rules can be represented by interest rate feedback rules that generalize the celebrated proposal of taylor 1993 optimal rules however require that the current interest rate operating target depend positively on the recent past level of the operating target and its recent rate of increase in a way that is characteristic of estimated central bank reaction functions but not of taylor s proposal we furthermore find that a robustly optimal policy rule is almost inevitably an implicit rule that requires the central bank to use a structural model to project the economy s evolution under the contemplated policy action however calibrated examples suggest that optimal rules place less weight on projections of inflation or output many quarters in the future than do rules often discussed in the literature on inflation targeting or in the current practice of inflation forecast targeting central banks

agency relationships in family firms theory and evidence does owner management necessarily eliminate the agency costs of ownership drawing on agency literature and on the economic theory of the household we argue that private ownership and owner management expose privately held owner managed firms to agency threats ignored by jensen s and meckling s 1976 agency model private ownership and owner management not only reduce the effectiveness of external control mechanisms they also expose firms to a self control problem created by incentives that cause owners to take actions which harm themselves as well as those around them jensen 1994 p 43 thus shareholders have incentive to invest resources in curbing both managerialand owner opportunism we extend this thesis to the domain of the family firm after developing hypotheses which describe how family dynamics and specifically altruism exacerbate agency problems experienced by these privately held owner managed firms we use data obtained from a large scale survey of family businesses to field test our hypotheses and find evidence which suggests support for our proposed theory finally we discuss the implications of our theory for research on family and other types of privately held owner managed firms

performance of monetary policy with internal central bank forecasting abstract recent models of monetary policy have analyzed the desirability of different optimal and ad hoc interest rules under the restrictive assumption that forecasts of the private sector and the central bank are homogeneous this paper studies the implications of heterogeneity in forecasting by the central bank and private agents for the performance of interest rules in a framework of econometric learning

information and securities a note on pareto dominance and the second best a unified analysis is provided of two related problems the first concerns the welfare impact of changing the set of tradeable securities in an incomplete market economy the second concerns the welfare implications of changing the common information structure faced by all agents both problems arise from a common second best framework in which expanding the set of trading opportunities can lead to a pareto worsening journal of economic literature classification number 026 rl 1987 academic press inc in this note we provide a unified analysis of two related problems the first concerns the welfare impact of changing the set of tradeable securities in an incomplete market economy the second concerns the welfare implifications of changing the common information structure faced by all agents we will discuss apparent paradoxial results that arise in both problems using a single geometric example the example provides a clear illustration of the source of the apparent paradoxes both problems arise from a common second best framework by second best we mean the lipsey lancaster 20 idea of additional constraints on allocations over and above resource availability constraints our discussion brings together two related but distinct literatures the we are greatly indebted to james ohlson for many constructive comments and to david kreps and n v long for comments on a previous draft

stable near rational sunspot equilibria abstract we introduce a new class of solutions to nonlinear forward looking models called near rational sunspot equilibria nrse nrse are natural nonlinear extensions of the usual sunspot equilibria associated with the linearized version of the economy and are near rational in that agents use the optimal linear forecasting model when forming expectations generic results for existence and stability under learning are established nrse in indeterminate nonlinear models are found to be stable under learning provided that the corresponding linearized model s minimal state variable solution is e stable nrse are readily computable and our results make it possible to use the standard linear tools to search for stable nrse we illustrate our results using a canonical nonlinear new keynesian model

the taylor principle fights back part ii abstract the existing literature holds that the taylor principle often leads to indeterminacy in new keynesian models that allow for capital accumulation and limited asset market participation this conclusion is special however to the case of continuous full employment when the assumption of perfect wage flexibility is relaxed very slightly so that the labor market clears quickly but not instantaneously determinacy is the norm the threat of indeterminacy is limited to a tiny irrelevant corner of the parameter space where the elasticity of labor supply is unusually high and real wage adjustment is unbelievably fast everywhere else the taylor principle guarantees a unique rational expectations equilibrium the dramatic difference in results reflects the sensitivity of the monetary transmission mechanism to the speed of adjustment in the labor market

equilibrium indeterminacy and asset price fluctuation in japan a bayesian investigation this paper investigates sources of asset price fluctuation in japan using an estimated financial accelerator model for explicit treatment of expectational beliefs characterized by sunspots the model is analyzed over the parameter space where the equilibrium can be indeterminate we show that indeterminacy arises if the financial accelerator effect is sufficiently large according to our bayesian estimation results japan s economy was affected by sunspot shocks however the contribution of the sunspots to asset price volatility was low rather net worth and cost shocks drove the asset price fluctuation we find however that the sunspots substantially affected capital investment

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

monetary policy learning and the speed of convergence under the assumption of bounded rationality economic agents learn from their past mistaken predictions by combining new and old information to form new beliefs the purpose of this paper is to investigate how the policy maker by affecting private agents learning process determines the speed at which the economy converges to the rational expectation equilibrium i find that by reacting strongly to private agents expected inflation a central bank increases the speed of convergence and shortens the length of the transition to the rational expectation equilibrium i use speed of convergence as an additional criterion for evaluating alternative monetary policies i find that a fast convergence is not always desirable

monetary policy trend inflation and the great moderation an alternative interpretation with positive trend inflation the taylor principle does not guarantee a determinate equilibrium we provide new theoretical results on determinacy in new keynesian models with positive trend inflation and new empirical findings on the federal reserve s reaction function before and after the volcker disinflation to find that i while the fed likely satisfied the taylor principle before volcker the us economy was still subject to self fulfilling fluctuations in the 1970s ii the us economy switched to determinacy during the volcker disinflation and iii the switch reflected changes in the fed s response to macroeconomic variables and the decline in trend inflation jel e12 e23 e31 e32 e52

monetary policy inertia more a fiction than a fact abstract empirical estimates of monetary policy reaction functions feature a very high estimated degree of monetary policy inertia this evidence is very hard of reconcile with the alternative evidence of low predictability of monetary policy rates in this paper we examine the potential relevance of the problem of weak instruments to correctly identify the degree of monetary policy inertia in forward looking monetary policy reaction function of the type originally proposed by taylor 1993 discretion versus policy rules in practice canergie rochester conference series on public policy 39 195 214 after appropriately diagnosing and taking care of the weak instruments problem we find an estimated degree of policy inertia which is significantly lower than the common value in the empirical literature on monetary policy rules

ex post efficiency and ex post welfare some fundamental considerations ross starr 1973 demonstrates that a competitive equilibrium while ex ante pareto efficient may not be ex post efficient the authors contend that an implicit second best issue requires that this assertion be substantively qualified specifically the ex ante efficiency concept is second best while its ex post counterpart is first best they est ablish the equivalency of first best ex post and ex ante concepts whe never the second best ex ante efficiency conditions hold the second best elements derive from the timing of information flows starr s theorem is shown to concern the social gains from improved information additional results deal with varying concepts of ex post welfare copyright 1988 by the london school of economics and political science

toward a theory of financial accounting welfare and public information in this paper we employ the concepts of neoclassical welfare economics to consider the role of publicly available information in various market configurations modeling pure exchange economies the need for such a study arises for several reasons first while the existing process of producing and disseminating accounting information may with some oversimplification be described as generating publicly available information there has been no systematic study of the effects of such a process on either the allocational efficiency of a market or on the broader welfare implications of such information for the participants transacting in such a market second the existing literature fails at least to some extent to capture the flavor or spirit of the role of public information in a market setting at first glance it might appear that information would have no social benefit in a pure exchange economy since it does not increase the aggregate supply of consumptive goods across states and dates as will be demonstrated this impression is not justified as a general conclusion the important dimension of information is that it affects perceived risks

monetary policy stock prices and consumption externalities abstract we study interest rate rules responding to stock prices in a sticky price sticky wage new keynesian framework subject to consumption externalities for given wage rigidity such rules are beneficial to equilibrium determinacy if households preferences feature sufficiently strong keeping up with the joneses externalities

monopsony with nominal rigidities an inverted phillips curve with nominal wage rigidities it is crucial to distinguish whether wages are set by workers or firms whether we have monopoly or monopsony power this paper provides a model of monopsony power in the labour market and a monopsonistic phillips curve if wages are set by firms who face nominal rigidities and there is inflation firms cannot adjust their wages fully the real wage falls and labour supply hence output decreases this provides a phillips curve where the output gap is negatively correlated with wage inflation in such a world monetary policy affects the intertemporal labour supply while the phillips curve is a labour demand curve interest rate cuts reduce the labour supply instead of boosting demand they are contractionary

some implications of learning for price stability abstract survey data on expectations of a range of macroeconomic variables exhibit low frequency drift in a new keynesian model consistent with these empirical properties optimal policy in general delivers a positive inflation rate in the long run two special cases deliver classic outcomes under rational expectations as the degree of low frequency variation in beliefs goes to zero the long run inflation rate coincides with the inflation bias under optimal discretion for non zero low frequency drift in beliefs as households become highly patient valuing utility in any period equally the optimal long run inflation rate coincides with optimal commitment price stability is optimal the optimal state contingent response to cost push disturbances similarly reflects properties of optimal discretion and optimal commitment depending on the degree of low frequency variation in beliefs when beliefs exhibit substantial variation in response to short run forecast errors optimal policy is closer to commitment

learning monetary policy and asset prices this working paper should not be reported as representing the view s of the imf the views expressed in this working paper are those of the author s and do not necessarily represent those of the imf or imf policy working papers describe research in progress by the author s and are published to elicit comments and to further debate

notes on optimality of rational expectations equilibrium with incomplete markets abstract this paper shows that under certain conditions an economy with securities and post state spot markets can support rational expectations equilibria of economies in a partial arrow debreu regime of incomplete contingent markets using these conditions examples are constructed to show that non optimal equilibria might exist for the securities regime and introduction of additional securities might make everyone worse off these examples are shown to be robust and valid in a more general context than those of hart j econ theory 11 1975 418 443

monetary policy transmission in a model with animal spirits and house price booms and busts abstract can monetary policy trigger pronounced boom bust cycles in house prices and create persistent business cycles we address this question by building heuristics into an otherwise standard dsge model as a result monetary policy sets off waves of optimism and pessimism animal spirits that drive house prices that in turn have strong repercussions on the business cycle we compare our findings to a standard model with rational expectations by means of impulse responses we suggest that a standard taylor rule is not well suited to maintain macroeconomic stability instead an augmented rule that incorporates house prices is shown to be superior

learning about monetary policy rules abstract we study macroeconomic systems with forward looking private sector agents and a monetary authority that is trying to control the economy through the use of a linear policy feedback rule we use stability under recursive learning a la evans and honkapohja learning and expectations in macroeconomics princeton university press princeton new jersey 2001 as a criterion for evaluating monetary policy rules in this context we find that considering learning can alter the evaluation of alternative policy rules

avoiding uncertainty in hofstede and globe this paper compares the uncertainty avoidance ua dimension of national culture across the hofstede and globe models looking at relationships in both data and analysis rather than mutual support we detail major differences and anomalies across the studies we show how these anomalies are resulting in contradictory explanations in research on national differences across a range of individual firm and country level phenomena we clarify the ua measurement in both hofstede and globe and find that the two models are measuring different components of the ua construct we propose a two component model of ua namely ua stress and ua rule orientation and confirm its validity with national culture data from the hofstede and globe studies and economic data from the world bank we also explain the negative globe ua practices values relationship using motivational theories a way forward in future ua related research is suggested the hofstede ua index the globe ua practices scores and the globe ua values scores should be used within the specific domains that they represent that is stress rule orientation practices and rule orientation aspirations respectively resolving the contradictions in ua between and within hofstede and globe will help cross cultural researchers develop more robust theories and more practical recommendations for international business management

on non uniqueness in rational expectations models an attempt at perspective abstract many macroeconomic models involving rational expectations give rise to an infinity of solution paths even when the models are linear in all variables some writers have suggested that this non uniqueness constitutes a serious weakness for the rational expectations hypothesis one purpose of the present paper is to argue that the non uniqueness in question is not properly attributable to the rationality hypothesis but instead is a general feature of dynamic models involving expectations it is also argued that there typically exists in a very wide class of linear rational expectations models a single solution that excludes bubble or bootstrap effects one that occur only because they are arbitrarily expected to occur a systematic procedure for obtaining solutions free from such effects is introduced and discussed in addition this procedure is used to interpret and reconsider several prominent examples with solution multiplicities including ones developed by fischer black and john b taylor

technology shocks and monetary policy assessing the fed s performance abstract the purpose of the present paper is twofold first we characterize the fed s systematic response to technology shocks and its implications for u s output hours and inflation second we evaluate the extent to which those responses can be accounted for by a simple monetary policy rule including the optimal one in the context of a standard business cycle model with sticky prices our main results can be described as follows first we detect significant differences across periods in the response of the economy as well as the fed s to a technology shock second the fed s response to a technology shock in the volcker greenspan period is consistent with an optimal monetary policy rule third in the pre volcker period the fed s policy tended to overstabilize output at the cost of generating excessive inflation volatility our evidence reinforces recent results in the literature suggesting an improvement in the fed s performance

business ethics and the development of intellectual capital this paper documents that business ethics has positive impacts upon the development of intellectual capital knowledge has become the most important asset of modern businesses and this study argues that business ethics is associated with the development of intangible knowledge resources intellectual capital businesses with ethical values at the core reinforce ethical conducts and successfully build trust with their various stakeholders leading to the formation of an ethical and trustworthy corporate culture and a positive corporate environment thus in this reasoning an ethical approach to business can encourage open communication problems solving knowledge sharing and creativity among employees to increase organisational capital enhance interactions and relationships with suppliers customers and other stakeholders to increase social capital attract and retain good talent to increase human capital questionnaire survey is adopted as the research method with businesses in the electronic and information technology industries in taiwan as sample the results suggest that business ethics is associated with increased intellectual capital thus this study demonstrates that the development of intellectual capital is in line with strengthened ethics it contributes to the literature through combining research on business ethics with intellectual capital theories and extends the extant intellectual capital literature

inflation forecasts and monetary policy proposals for inflation targeting as a strategy for monetary policy leave open the important operational question of how to determine whether current policies are consistent with the long run inflation target an interesting possibility is that the central bank might target current private sector forecasts of inflation either those made explicitly by professional forecasters or those implicit in asset prices we address the issue of existence and uniqueness of rational expectations equilibria when the central bank uses private sector forecasts as a guide to policy actions in a dynamic model which incorporates both sluggish price adjustment and shocks to aggregate demand and aggregate supply we show that strict targeting of inflation forecasts is typically inconsistent with the existence of rational expectations equilibrium and that policies approximating strict inflation forecast targeting are likely to have undesirable properties we also show that economies with more general forecast based policy rules are particularly susceptible to indeterminacy of rational expectations equilibria we conclude that although private sector forecasts may contain information useful to the central bank ultimately the monetary authorities must rely on an explicit structural model of the economy to guide their policy decisions this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

inflation determination with taylor rules is new keynesian analysis critically flawed abstract cochrane 2007 has strongly questioned the basic economic logic of current monetary policy analysis arguing that new keynesian nk models imply rational expectations paths with explosive inflation that do not imply explosions in real variables relevant for transversality conditions consequently the usual logic does not rule out solutions with explosive inflation that result does not however justify negative conclusions about nk analysis for a different criterion is logically satisfactory it is that to be plausible a re solution must satisfy the property of least squares learnability adoption of this criterion serves to justify in principle the bulk of current mainstream analysis

learning and price volatility in duopoly models of resource depletion the aim of this paper is to provide a theoretical model that can account for price fluctuations in depletable resource markets we do so by introducing learning into a hotelling style duopoly model of optimal resource depletion before the depletable resource becomes scarce the self confirming equilibrium of the model mirrors noncooperative rational expectations equilibrium in that supply is high and price is low although learning does induce occasional upward price spikes that are followed by a long period of falling price once the depletable resource becomes scarce the dynamics of the market change significantly with the self confirming equilibrium mirroring the cooperative rather than noncooperative rational expectations equilibrium supply is low and price is high price spikes still occur but against a background of increasing prices when scarcity is sufficient then the market is permanently in a self confirming equilibrium that is equivalent to cooperative rational expectations equilibrium

learning in a misspecified multivariate self referential linear stochastic model this paper introduces a general method to study stability under learning of equilibria resulting from agents with misspeci ed perceptions of the law of motion of the economy this is done by transforming the actual and perceived laws of motion into the form of seemingly unrelated regressions and then linearly projecting the actual law of motion into the same class as the perceived law of motion i study the new keynesian is lm model with inertia under all possible classes of restricted perceptions it turns out that the results found in bullard and mitra 2002 2003 are robust under misspeci ed expectations

corporate leaders in britain and america a cross national analysis this study tested for the extent of similarity between 1708 american senior vice presidents and those of 418 british counterparts the sample was drawn from the fortune 500 and the times 500 being representative of the top management teams of the largest national companies dominating domestic economies

monetary policy judgment and near rational exuberance we study how the use of judgement or add factors in macroeconomic forecasting may disturb the set of equilibrium outcomes when agents learn using recursive methods we examine the possibility of a new phenomenon which we call exuberance equilibria i n the new keynesian monetary policy framework inclusion of judgement in forecasts can lead to self fulfilling fluctuations in a subset of the determinacy region we study how policymakers can minimize the risk of exuberance

does the reserve bank of australia follow a forward looking nonlinear monetary policy rule abstractthe conventional monetary policy rule describes a simple linear relationship between the domestic interest rate inflation rate and output gap an important extension to this rule is to inc

the effect of national culture on the choice of entry mode characteristics of national cultures have frequently been claimed to influence the selection of entry modes this article investigates this claim by developing a theoretical argument for why culture should influence the choice of entry two hypotheses are derived which relate culture to entry mode choice one focusing on the cultural distance between countries the other on attitudes towards uncertainty avoidance using a multinomial logit model and controlling for other effects the hypotheses are tested by analysing data on 228 entries into the united states market by acquisition wholly owned greenfield and joint venture empirical support for the effect of national culture on entry choice is found

another weakness of determinacy as a selection criterion for rational expectations models abstract this paper argues against determinacy as a guide to interpret rational expectations solutions using an example in which a determinate solution exists but differs sharply in dynamic behavior from that implied by the model considered on a sector by sector basis

do real balance effects invalidate the taylor principle in closed and open economies this paper examines the determinacy implications of forecast based monetary policy rules that set the interest rate in response to expected future inflation in a neo wicksellian model that incorporates real balance effects we show that the presence of such effects in closed economies restricts the ability of the taylor principle to prevent indeterminacy of the rational expectations equilibrium the problem is exacerbated in open economies particularly if the policy rule reacts to consumer price rather than domestic price inflation however determinacy can be restored in both closed and open economies with the addition of monetary policy inertia

economic creativity and innovation implementation the entrepreneurial drivers of growth evidence from 63 countries this paper examines the effect of culture on national innovation and prosperity because culture shapes the way people think about and behave in regard to risk opportunities and rewards it should influence the nature of entrepreneurial activity and by extension economic outcomes using structural equation modeling on a sample of 63 countries we propose and test a comprehensive explanation of how culture as an umbrella construct as opposed to an analysis of its constituent parts affects innovation and national prosperity we propose a two stage model of innovation and find support for our hypothesized relationship that economic creativity influences innovation implementation at the national level we find that culture does indeed influence economic creativity we also find that innovation implementation explained some of the variation in prosperity across countries by establishing that big picture culture matters to innovation the door has opened for researchers to evaluate this relationship using data from any one of a number of rival culture frameworks moreover these empirical finding buttress the theoretical arguments that culture powerfully shapes the character of national innovation

the taylor rule and optimal monetary policy where it denotes the fed s operating target for the federal funds rate pt is the inflation rate measured by the gdp deflator yt is the log of real gdp and y t is the log of potential output identified empirically with a linear trend the rule has since been subject to considerable attention both as an account of actual policy in the united states and elsewhere and as a prescription for desirable policy taylor argues for the rule s normative significance both on the basis of simulations and on the ground that it describes u s policy in a period in which monetary policy is widely judged to have been unusually successful taylor 1999 suggesting that the rule is worth adopting as a principle of behavior here i wish to consider to what extent this prescription resembles the sort of policy that economic theory would recommend i consider the question in the context of a simple but widely used optimizing model of the monetary transmission mechanism which allows one to reach clear conclusions about economic welfare the model is highly stylized but incorporates important features of more realistic models and allows me to make several points that are of more general validity out of concern for the robustness of the conclusions reached the analysis here addresses only broad qualitative features of the taylor rule and attempts to identify features of a desirable policy rule that are likely to hold under a variety of model specifications

monetary policy and asset prices with belief driven fluctuations abstract we present a heterogeneous agents new keynesian model subject to a cost channel of monetary policy transmission constant turnover between long time traders and newcomers in market activities combined with restricted trading opportunities introduces a feedback from the stock market to real activity making stock prices non redundant for the business cycle we show that strict inflation targeting can lead to equilibrium indeterminacy even if the policy rule satisfies the taylor principle a belief driven shock to stock price generates relative volatilities of key financial variables which are very close to what is observed in u s data this result hints to the possibility that the financial instability witnessed since the mid to late 1990s was the result of waves of rational exuberance and pessimism in financial markets our analysis suggests that a mild response to stock prices in the central bank s policy rule can restore equilibrium determinacy and therefore rule out non fundamental volatility

the lucas critique policy invariance and multiple equilibria the lucas critique of econometric policy evaluation argues that the parameters of econometric models are subject to theoretical cross equation restrictions which follow from the fact that the endogenous variables of the models are chosen optimally by forward looking agents in this paper i argue that these facts alone are insufficient to generate such restrictions i present an example of a model in which there exist multiple stationary rational expectations equilibria one of which is supported by a process invariant forecast rule immunity to the lucas critique is proposed as a selection criterion in models with multiple equilibria

financial factors and monetary policy determinacy and learnability of equilibrium abstract we contribute to the debate on whether central banks should respond to financial factors in monetary policy rules by evaluating equilibrium determinacy and e stability in the presence of a financial accelerator policies responding to lagged asset prices either reduce the region of determinacy or e stability in the parameter space however a response to current asset prices expands both regions of determinacy and e stability policy rules reacting to credit volume constrict the determinacy region most policies responding to credit spreads expand determinacy and e stability regions we favor the inclusion of current asset prices or credit spreads in monetary policy rules

toward a theory of agency and altruism in family firms surprisingly the majority of u s family firms offer employed family members short and long term performance based incentive pay we draw on the household economics and altruism literatures to explain why family firms might feel compelled to do so and develop theory that predicts when this practice will be beneficial results based on data obtained from 883 family firms show that altruism as reflected by the parents estate and share transfer intentions moderates the effect of these pay incentives as our theory predicts as such this article helps explain both how altruism influences agency relationships in family firms and why business practice in family firms differs from those found in other types of firms

real time rational expectations and indeterminacy abstract this paper uses the technique of lubik and schorfheide lubik t schorfheide f 2004 testing for indeterminacy an application to u s monetary policy the american economic review 94 1 190 217 to test for indeterminacy in a new keynesian model using real time instead of revised data on the output gap the results suggest indeterminacy both before 1979 and after 1982

the effect of cultural distance on entry mode choice international diversification and mne performance a meta analysis although a growing literature indicates that cultural distance that is differences between national cultures is an important determinant of organizational actions and performance both empirical and theoretical concerns abound in this study the relationships of cultural distance with entry mode choice international diversification and mne performance are examined by meta analyzing data from 66 independent samples with cumulative sample sizes ranging from 2 255 to 24 152 regression results failed to provide statistical evidence of significant relationships between cultural distance and entry mode choice international diversification and mne performance the examination of moderator effects however yielded important results we found a strong negative association between cultural distance and entry mode choice for us based mnes the cultural distance international diversification relationship was negative for high technology industries while it was positive for other industries cultural distance also had a strong positive effect on mne performance for developed country investments a similar strong positive relationship was found between cultural distance and international diversification in studies with more recent samples results of this study indicate that substantial additional research is needed before the role of cultural distance is fully understood

sufficient and necessary conditions for information to have social value in pure exchange this paper extends corrects and unifies earlier statements concerning the social value of public information as well as the no trading conditions in pure exchange sufficient and necessary conditions are provided for both the single period and two period cases in a postsignal trading model the social value of information is shown to be closely linked to the allocational efficiency of the market the degree of homogeneity of prior beliefs and of information structures the time additivity of preferences and the efficiency of endowments we conclude that the case in favor of public information is much stronger than previously suggested

output persistence from monetary shocks with staggered prices or wages under a taylor rule we analytically examine output persistence from monetary shocks in a dsge model with staggered prices or wages under a taylor rule surprisingly while taylor style staggering never yields persistence calvo style staggering of wages does generate persistence under decreasing returns to labour c 2009 elsevier b v all rights reserved

cultural influences on national rates of innovation abstract the purpose of this research was to examine the effect of the cultural values of individualism power distance uncertainty avoidance and masculinity on national rates of innovation in 33 countries in 1975 and 1980 the study found that rates of innovation are most closely associated with the cultural value of uncertainty acceptance but that lack of power distance and individualism also are related to high rates of innovation this research suggests that nations may differ in their rates of innovation because of the cultural values of their citizens these findings have important implications for managers and policy makers first culture matters countries may not be able to increase their rates of innovation simply by increasing the amount of money spent on research and development or industrial infrastructure they also may need to change the values of their citizens to those that encourage innovative activity this concept in turn suggests that national rates of innovation are driven by more fundamental forces than economic conditions and that societal change may be necessary to make less innovative societies more innovative second the values associated with high national rates of innovation are those that many scholars have long argued are important at the firm level an acceptance of uncertainty appears to be necessary probably because innovation requires a tolerance for risk and change individualism seems to be important perhaps because of its association with autonomy independence and freedom lack of power distance appears important perhaps reflecting the role that tolerance of change in the social order and distribution of power play in the innovation process third the study indicates that the strength of the relationship between innovation and two cultural values individualism and lack of power distance were stronger in 1975 than in 1980 suggesting perhaps that these values are becoming less important in spurring the innovation process this finding supports the anecdotal evidence that many collectivist and hierarchical asian nations are becoming more innovative fourth this study shows that per capita income is a more important economic variable than industrial structure in determining national rates of innovation this finding confirms previous work that has shown that as nations become wealthier they become more innovative the reason may be that wealthier countries have more demand for innovations both because innovations are often laborsaving and because wealthier nations have greater demand for new and differentiated consumer goods

the salience of culture s consequences the effects of cultural values on top executive commitment to the status quo while top executives are argued to play a central role in strategic adaptation evidence suggests that they are not equally open to organizational change this study extends earlier investigation of the determinants of top executive commitment to the status quo csq to the international arena examining the influence of cultural values on executive open mindedness toward change using data from a survey of top managers in 20 countries analyses reveal that values of individualism uncertainty avoidance power distance and long term orientation are significantly related to executives adherence to existing strategy and leadership profiles further while confirming earlier findings that industry tenure is positively related to strategy csq results show that tenure does not significantly affect leadership csq once cultural values are controlled in summary the findings reveal that culture has an important impact on executive mindsets as demonstrated by the fact that executives of differing cultural background are not equally open to change in organizational strategy and leadership profiles second the findings suggest that executives views of appropriate leadership profiles reflect the imprint of cultural socialization moreso than professional experience finally and more broadly the study offers empirical support for the view that values figure prominently in shaping executives strategic and leadership orientations 1997 by john wiley sons ltd

social learning and monetary policy rules we analyse the effects of social learning in a monetary policy context social learning might be viewed as more descriptive of actual learning behaviour in complex market economies in our model taylor principle governs uniqueness and expectational stability of rational expectations equilibrium ree under homogeneous recursive algorithms we find that the taylor principle is not necessary for convergence to ree minimum state variable msv equilibrium under social learning sunspot equilibria exist in the indeterminate region our agents cannot co ordinate on a sunspot equilibrium in general form specification however they can co ordinate on common factor specification we contribute to the use of genetic algorithm learning in stochastic environments

classifying monetary economics fields and methods from past to future we propose a simple yet sufficiently encompassing classification scheme of monetary economics it comprises three fundamental fields and six recent areas that expand within and across these fields the elements of our scheme are not found together and in their mutual relationships in earlier studies of the relevant literature neither is this an attempt to produce a relatively complete systematization our intention in taking stock is not finality or exhaustiveness we rather suggest a viewpoint and a possible ordering of the accumulating knowledge our hope is to stimulate an improved understanding of the evolving nature and internal consistency of monetary economics at large

are non fundamental equilibria learnable in models of monetary policy abstract recent models of monetary policy can have indeterminacy of equilibria which is often viewed as a difficulty of these models we consider the significance of indeterminacy using the learning approach to expectations formation we employ expectational stability as a selection criterion for different equilibria and derive the expectational stability and instability conditions for forward looking multivariate models both without and with lags the results are applied to several monetary policies

uncertainty avoidance risk tolerance and corporate takeover decisions abstract in this paper we examine the role of national culture in corporate takeover decisions by arguing that managerial risk tolerance a combination of risk aversion and risk perception at the national level is a cultural trait and affects the expected net synergies ceos require we propose a theoretical framework that links ceo risk tolerance to the expected net synergies we empirically show that ceos of firms located in countries with lower levels of risk tolerance measured by hofstede s 1980 2001 uncertainty avoidance score require higher premiums on takeovers and show that uncertainty avoidance plays a greater role in relatively large takeovers additional testing reveals that ceos from high uncertainty avoiding nations engage less in cross border cross industry takeovers suggesting that uncertainty avoidance captures more the ceo s risk perception than his her risk aversion

high profit strategies in mature capital goods industries a contingency approach high profit and low profit strategic gestalts in two different types of mature capital goods industries are examined multiple avenues to high profits are found within both types but they differ

situational ethics across borders a multicultural examination managers throughout the world regularly face ethical dilemmas that have important and perhaps complex professional and personal implications further societal consequences of decisions made can be far reaching in this study 210 financial services managers from australia chile ecuador and the united states were queried about their ethical beliefs when faced with four diverse dilemmas in addition the situational context was altered so the respondent viewed each dilemma from a top management position and from a position of economic hardship results suggest a complex interaction of situation culture and issue when individuals make ethical judgments specifically chileans were found to have different beliefs about sex discrimination and child labor dilemmas when compared to their colleagues from the other three nations chileans and australians also disagreed on the bribery dilemma anglo managers were more likely than latin american managers to change their ethical responses when the situation was altered for multinational firms interested in maintaining healthy ethical climates the findings suggest that culturally contingent ethical guidelines or policies adapted to the local customs must be considered further managers must remain aware of issues related to specific situations both internal and external that would cause subordinates to alter their moral judgment

public and private information about short and long lived assets using an overlapping generations model this paper considers the impact of an improvement in the technology that investors use to obtain signals about future payouts of a risk asset it is shown that the effects of such a change on the predictability of the gross return on the asset and on the welfare of the agents depend on whether the asset will make multiple future payouts is long lived or a single future payout is short lived and whether the signals about the payoffs are public or private copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

monetary policy expectations and commitment commitment in monetary policy leads to equilibria that are superior to those from optimal discretionary policies a number of interest rate reaction functions and instrument rules have been proposed to implement or approximate commitment policy we assess these rules in terms of whether they lead to a rational expectations equilibrium that is both locally determinate and stable under adaptive learning by private agents a reaction function that appropriately depends explicitly on private sector expectations performs particularly well on both counts