Research Lab

This paper argues that the use of monetary policy in response to the Asian financial crisis worsened the economic downturn and contributed to global economic instability, that we have spent too little time thinking about the behavior of the international economic and financial institutions given the important role that they play in the global economy and that reforms are needed to return the IMF to its original mandate of focusing on global financial stability.

When a firm practices conservative accounting, changes in the amount of its investments can affect the quality of its earnings. Growth in investment reduces reported earnings and creates reserves. Reducing investment releases those reserves, increasing earnings. If the change in investment is temporary, then current earnings is temporarily depressed or inflated, and thus is not a good indicator of future earnings. This study develops diagnostic measures of this joint effect of investment and conservative accounting.

We examine the valuation performance of a comprehensive list of value drivers and find that multiples derived from forward earnings explain stock prices remarkably well: pricing errors are within 15 percent of stock prices for about half our sample. In terms of relative performance, the following general rankings are observed consistently each year: forward earnings measures are followed by historical earnings measures, cash flow measures and book value of equity are tied for third, and sales performs the worst.

This paper studies the economic benefits of return predictability by analyzing the impact of market and volatility timing on the performance of optimal portfolio rules. Using a model with time-varying expected returns and volatility, we form optimal portfolios sequentially and generate out-of-sample portfolio returns. We are careful to account for estimation risk and parameter learning.

Over the last three decades, there has been a substantial shift in financial market policy towards the promotion of financial liberalization. Policy makers around the globe have been preoccupied with deregulating interest rates, lifting restrictions on bank portfolios and enticing competition in financial services. Financial deregulation is typically accompanied with a change in the system of prudential regulation.

The Bretton Woods Institutions were established just over 50 years ago to aid in the reconstruction of Europe after World War II and to make it less likely that another global calamity such as the Great Depression would occur again. Much has happened in the world since then. The author re-examines the role of these institutions today.

The advances in the economics of the public sector during the past quarter century have been as pronounced as in any field within economics. Public finance has become a rigorous branch of applied microeconomics, incorporating the best thinking and most advanced tools of both theoretical economics and econometrics.

From the publisher: This powerful, unsettling book gives us a rare glimpse behind the closed doors of global financial institutions by the winner of the 2001 Nobel Prize in Economics. Renowned academic economist Joseph E. Stiglitz served seven years in Washington, as chairman of President Clinton's Council of Economic Advisers and as chief economist at the World Bank. In this book, Stiglitz recounts his experiences in such places as Ethiopia, Thailand, and Russia.