Macroeconomics

In the wake of the recent corporate scandals that have damaged investor confidence, policymakers, academics, and pundits have taken aim at accounting rules as one of the areas in need of reform. Proposals for changing the rules governing the accounting for the granting of stock options has become one of the most hotly contested areas. Advocates of reform argue that options are a form of compensation and that granting options entails real costs to stockholders. They argue that it follows that options should be included as an expense item in the firm's financial statements.

The Theory and Practice of Revenue Management is a book that comprehensively covers theory and practice of the entire field, including both quantity and price-based RM, as well as significant coverage of supporting topics such as forecasting and economics. The authors believe such a comprehensive approach is necessary to fully understand the subject. A central objective of the book is to unify the various forms of RM and to link them closely to each other and to the supporting fields of statistics and economics.

In this essay, I want to look at certain ethical aspects of the way that globalization has proceeded in recent years. I shall argue that in the way that they have sought to shape globalization, the advanced industrial countries have violated some basic ethical norms.

While today it is recognized that globalization may have adverse effects on particular groups, in this essay, I want to set forth some of the reasons why globalization, when not managed well, may actually be adverse to overall economic growth, and the ability of countries to take advantage of the advances associated with the New Economy. Not just the poor may suffer. There are several channels through which the adverse effects may run.

This paper analyzes the effects of tax policy on the strategic choices of multinationals and on national welfare. Contrary to existing theory, in the absence of foreign taxation, deferral of home-country taxation until earnings on outbound FDI are repatriated is generally superior to including those earnings in current income. This holds even if the home country taxes domestic investment less generously. This is also generally superior to exempting foreign income.

This paper examines the effects of the Tax Reform Act of 1986 on the international location decisions of U.S. financial services firms. The Act included rule changes that made it substantially more difficult for U.S. firms to defer U.S. taxes on overseas financial services income held in low-tax jurisdictions. We use information from the tax returns of U.S. corporations to examine how local taxes affect the allocation of financial assets held abroad by financial services firms.

Numerous studies have documented that stock returns are negatively related to changes in interest rates, but there has been little corroborating research on the information in interest rate changes about the fundamentals that the stock market prices. The negative correlation is often attributed to changes in the discount rate, a denominator effect in a valuation model. However, there may also be a numerator effect on the expected payoffs that are discounted.

During the recent stock market bubble, the traditional financial reporting model was assailed as a backward-looking system, out of date in the Information Age. With the bursting of the bubble, the quality of financial reporting is again under scrutiny, but now for not adhering to traditional principles of sound earnings measurement and asset and liability recognition. This paper is a retrospective on the quality of financial reporting during the 1990s. Did reporting under U.S. GAAP perform well during the bubble, or was its quality suspect?

Something is wrong with the global financial system. One might think the system would shift money from rich countries, where capital is in abundance, to those where it is scarce, while transferring risk from poor countries to rich ones, which are most able to bear it. A well-functioning global financial system would provide money to countries in their times of need, thereby contributing to global economic stability.