Business Economics ®- April 2002

To download the entire April issue in one large file right click the link below, and choose Save to Disk. (Due to the large file size, you will have best results downloading the file and saving it, rather than trying to view it online.)

Articles can also be viewed individually online or downloaded. All articles are in Adobe Acrobat format (pdf). To get a free Adobe Acrobat reader, please see the Adobe site. Selected articles, as noted, are available to the public.

Download the April issue in one file (PDF, 877 K)

(Note: To save the entire issue, or any of the individual articles, directly to disk so that you can view them later, right-click on its link. Then select "Save Target As" in Internet Explorer, and "Save Link As" in Netscape Navigator, in the pop-up menu.)

Most articles are available for members only. Non-members can purchase articles at the NABE Document Store online.

Howard Kunreuther

The Role of Insurance in Managing Extreme Events: Implications for Terrorism Coverage
The terrorist attacks on the World Trade Center and the Pentagon have created a heavy demand for insurance against such events. However, it is difficult to price insurance against extreme events because the probability of such events happening again is highly ambiguous, and the potential loss is highly uncertain. This paper explores the analytic issues that insurers must resolve in offering such insurance, including the calculation of premiums, the capital necessary to provide insurance, and options for raising such capital. It also explores the possibilities for public-private partnerships for providing such insurance if private insurers are unwilling or unable to do so, drawing on experiences of other countries. Finally, it identifies a number of issues that must be resolved before the private sector can provide insurance against terrorist attacks and other extreme events.
(PDF, 94 K)

Paula Stern

Making Trade Policy While Pursuing the War on Terrorism
As in the war against communism, free trade is one of the most potent tools in combating terrorism. However, to move forward it is necessary to get broad agreement. This paper describes and discusses several critical aspects of current trade policy: (1) the Bush Administration use of US trade laws in the recent steel case and the role of the International Trade Commission as a safety valve in moving toward freer trade; (2) The President’s pending request to Congress for so-called fast track Trade Promotion Negotiating Authority (TPA) as a means of negotiating for freer trade, (3) The launch of the World Trade Organization (WTO) Doha Development Round, and (4) The Bush Administration’s approach to intellectual property rights (IPR) protection. While moving toward free trade will always be a balancing act between domestic and international interests, it must always be recognized that increasingly open trade policies helped to win the Cold War and will also help to win the War Against Terrorism.
(PDF, 41 K)

Francis H. Schott and Paula Stern

Comment and Reply
(PDF, 74 K)

Penelope B. Prime

China Joins the WTO: How, Why, and What Now?
This article analyzes the process and probable effects of China’s entry into the WTO from several different angles. The prospect of China’s membership has been controversial, both within China and in the international community, slowing the process considerably. A key factor pushing China’s application forward has been China’s significant move toward a market-oriented economy in the 1990s. However, adapting to the negotiated WTO package will be only part of the major changes China is likely to experience in the coming decade.
(PDF, 42 K)

Maurice Larrain

Do Interest Rates Lead Real Sales and Inventories?
This paper uses spectral analysis to study aggregate sales, inventories, and interest rates from a macroeconomic perspective. We assume countercyclical Federal Reserve policy acts on economic growth, sales, and inventories with a time lag of unknown duration. Interest rate changes affect sales first, and through sales, they indirectly influence inventories. Viewed from this perspective, changes in interest rates may be expected to have a leading long-run negative statistical association with sales. In addition, attempts to maintain proportionality between inventories and sales may explain a cyclical lead by sales on inventories and a positive correlation between these two variables. In turn, the lagged response of sales to interest rates and the co-movement of sales and inventories may explain, albeit indirectly, why a moderate long-run negative statistical association of inventories to interest rates may also be expected.
(PDF, 90 K)

Bruce D. Phillips

The Economic Costs of Expanding the Family and Medical Leave Act to Small Business
The federal Family and Medical Leave Act (FMLA) became effective in April 1995 for firms with more than fifty employees. Since then Congress has considered expanding the FMLA to cover small businesses. NFIB’s new Regulatory Impact Model (RIM) is used to study the effects of expanding the FMLA to firms with less than fifty employees. This paper focuses on estimation of three kinds of costs for small business that would be caused by an expansion of the FMLA: labor costs, management costs and various fees. The results of the analysis suggest that an expanded version of the FMLA would have serious, negative effects on the small business sector.
(PDF, 82 K)

Ralph H. Kozlow and
Rosemary D. Marcuss

The International Economic Accounts of the United States
With the growing importance of cross-border transactions, it is more important than ever for business to have comprehensive and accurate information on international flows of goods, services, and capital. This article describes the detailed content and organization of the official international accounts of the United States as both income statements and balance sheets. It also describes ongoing and future efforts to make these accounts even more useful in the future.
(PDF, 43 K)

Focus on Statistics

Ralph H. Kozlow

Selected Data Sources for International Trade and Finance Statistics
(PDF, 41 K)

Economics at Work

Jack E. Kleinhenz

Economics at Work—the Greater Cleveland Growth Association
(PDF, 35 K)

Book Reviews

Jan Kmenta

Christian Gourieroux and Joann Jasiak, Financial Econometrics: Problems, Models and Methods. Princeton University Press, 2001

Brandon Dupont

J. Scott Armstrong, Principles of Forecasting: A Handbook for Researchers and Practitioners. Kluwer Academic Publishers: 2001

(PDF, 56 K) Available to the public