infonet-economy

Corporate scandals are reflected in excessive top management compensation and fraudulent accounts. These scandals cause an enormous amount of damage, not only to the companies affected, but also to the market economy as a whole. As a solution, conventional wisdom suggests more monitoring and sanctioning of management. We argue that these efforts will create a governance structure for...

This paper analyzes how bond option prices are affected by different types of monetary policy. Analytical results from a general equilibrium model with sticky wages show that employment or output targeting typically give lower bond option prices than inflation targeting.

Markowitz and Sharpe won the Nobel Prize in Economics more than a decade ago for thendevelopment of Mean-Variance analysis and the Capital Asset Pricing Model (CAPM). In the yearn2002, Kahneman won the Nobel Prize in Economics for the development of Prospect Theory. Cannthese two apparently contradictory paradigms coexist?nIn deriving the CAPM, Sharpe, Lintner and Mossin assume...

"with Divisible Money *nAleksander Berentsen†nEconomics Department (WWZ), University of Basel, SwitzerlandnGuillaume Rocheteau‡nSchool of Economics, Australian National University, AustralianApril 14th, 2003nAbstractnThis paper studies the validity of the Friedman rule in a search model with divisi-blenmoney and divisible goods where the terms of trades are...

Under the assumption of normally distributed returns, we analyzenwhether the Cumulative Prospect Theory of Tversky and Kahneman (1992)nis consistent with the Capital Asset Pricing Model. We find that in everynfinancial market equilibrium the Security Market Line Theorem holds.nHowever, under the specific functional form suggested by Tversky andnKahneman (1992) financial market...

In September 2003 members of the World Trade Organization (WTO) must decide the terms of upon which any negotiations on a multilateral framework on competition policy are to be conducted. This decision will involve determining which, if any, provisions should be included in such a framework, and of particular interest here is the desirability of including of possible provisions on so...

In the past there was hardly any use of economic instruments in environmental policy, mainly command and control measures were used. More recently, ecological taxes as well as tradable permits became more popular and voluntary agreements have been implemented. Using the Public Choice approach we ask for the reasons of this wider acceptance of economic instruments. We conclude that...

Intertemporal models of the current account generally assume that global shocks do not affect the current account. We use this assumption to identify global and country-specific shocks in a bivariate VAR of output and the current account. Cross-country evidence from the G7 economies suggests that this identification works surprisingly well. We then employ our method to collect...