Business Economics ® - April 2000
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| Masthead, Editorial Board, Guidelines, From the Editor | |
| Articles | |
| Ray Fair | Fed
Policy and the Effects of a Stock Market Crash on the Economy Businesses face the risk at the current time of a stock market crash. Profits will undoubtedly suffer if there is a crash and the economy goes into a recession. This paper shows that unless there has been a huge increase in the long run PE ratio, the current level of stock prices implies an unrealistically large share of profits in GDP in the future. The paper also suggests that the Fed does not have the power to prevent a recession from taking place if there is a crash. |
| Joel Prakken | Potential
Productivity and the Stock Market in the "New" U.S. Economy Rapidly declining prices of capital goods recently have pushed the underlying growth of worker productivity to rates rivaling those of the 1960s. This acceleration of productivity helps explain today’s lofty equity valuations. The obscure irony is that faster productivity growth, by boosting the equilibrium real rate of interest and by engendering sizeable "wealth effects" on aggregate demand, may well require tighter—not easier—monetary policy, and corporate treasurers may expect financing costs to increase. This paper is based on the Presidential Address at NABE’s Annual Meeting, September 1999. |
| Leslie Rahl and Cherie Lee | Reflections
on Risk Management Unpredicted, drastic market moves every year for the past decade haunt the global capital markets, and managers everywhere have desperately sought proper risk management techniques to prepare for the next one. Tracking the evolution of risk management, significant improvements have developed in quantitative techniques, such as Value-at- Risk (VaR) measures. Effective risk management, however, also uses tools, such as Stress Testing, that incorporate qualitative as well as quantitative analysis. Creating hypothetical extreme market move scenarios and examining their impact allows managers to be better prepared for the “unexpected” by implementing well-thought-out defense mechanisms to lessen or even prevent losses. |
| Edward I. Altman with Naeem Hukkawala and Vellore Kishore | Defaults
and Returns on High-Yield Bonds: Lessons from 1999 and Outlook for 2000-2002 Business economists must weigh the benefits from increased leverage with the costs (bankruptcy and agency costs) of heightened financial risk and financial fragility. This study serves as a reminder, both to fixed income and equity investors, that even in a robust economy there is still no substitute for careful fundamental analysis at the firm level. |
| Sam Kinney | RIP
Fixed Pricing: The Internet Is on Its Way to "Marketizing" Everything The Internet has made business-to-business auction-based transactions a new force in markets. The result is to force some markets to be much more competitive, punishing firms that heretofore had been able to rely on imperfect information to mitigate inability to compete on cost and quality. It has also created a new type of Internet-based intermediary firm to set up auctions, qualify participants, and conduct the auctions. This article describes how seller-bidding reverse auctions are conducted, illustrates the cost savings that are possible for buyers, and discusses the implications of this new type of commerce. |
| Thomas Hazlett, Robert Litan, and Edwin Rockefeller | Legal and Economic
Aspects of the Microsoft Case: Antitrust in the Information Age
HTML PDF The outcome of the Microsoft antitrust case may have sig-nificant effects on those businesses that use Microsoft soft-ware and set important precedents for antitrust cases in the information age. This panel discussion provides back-ground on some of the issues associated with the case. Important concerns are whether consumers of software products have been harmed by Microsoft’s actions and whether they will benefit by the judicial remedy if Microsoft is found to have violated antitrust law. (Article available in Public Section) |
| David Payne | Predicting
GDP Growth Before the BEA’s Advance GDP Release Prior to the Bureau of Economic Analysis’ advance GDP release, many GDP components can be anticipated using publicly available source data and regression analysis. This article shows which ones, addresses the adding-up problem when using chain-weighted data, and notes pit-falls to avoid. A note of caution is that improving compo-nent predictions may not always improve predictions of total GDP. |
| Focus on... | |
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Robert Parker and C. Brian Grove |
Statistics:
BLS Occupational Employment Projections to 2008 |
| Michael Deneen and Andrew Gross | Industries
and Markets: End Uses and End Users of Small Electric Motors This article describes the market and outlook for small electric motors, which power an enormous variety of consumer and producer goods. |
| Book Reviews | |
| Norman Frumkin, Guide
to Economic Indicators - 3rd Edition Edmund
A. Mennis Marina v.N. Whitman, New World, New Rules: The Changing Role of the American Corporation Norman R. Augustine Click for reviews | Click for NABE Bookstore |
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