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Download the July issue in one file (PDF, 521 K)

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

John D Hawke, Jr

Independent Bank Regulation is Essential for Sustained Economic Growth: Its Absence Has Sometimes Proved To Be Catastrophic
September 11, 2001 has provided new awareness of the security challenges facing international finance. Convergence in international financial practice and an increased sense of caution has improved bank supervision and practice, leading to more efficient resource allocation. However, it is unlikely that there will ever be a onesize- fits-all template for financial supervision: historical evolution and culture imply that different countries will find their unique solutions. Nonetheless, the work of the Basel Committee on Banking Supervision has developed important principles that should be followed everywhere. One is that banking supervision should be independent and non-political. A second is that supervision standards should not be allowed to become lax. These principles are illustrated by discussion of instances when they have not been observed, contributing to banking problems in Argentina, Japan, South Korea, Turkey, and the United States. Since September 11, 2001, the value of independent, firm supervision has been confirmed in the United States, where the banking system is strong and likely to remain so.
(PDF, 36 K)

Robert Eisenbeis, Daniel Waggoner, and Tao Zha

Evaluating Wall Street Journal Survey Forecasters: A Multivariate Approach
This paper proposes a methodology for assessing the joint performance of multivariate forecasts of economic variables. The methodology is illustrated by comparing the rankings of forecasters by the Wall Street Journal with our alternative rankings. The results show that the methodology can provide useful insights as to the certainty of forecasts, as well as the extent to which various forecasts are similar or different.
(PDF, 87 K)

Roger E. Brinner and Joyce Brinner

State Revenue Prospects & Strategies: Neither as Unpredictable nor as Grim as Feared.
The poor recent economic performance of the U.S. economy has weakened state government revenues and created anxiety about the future. However, perspective on the past thirty years shows that the current economic slowdown is following fairly traditional patterns, and the recovery probably will as well. Several simple but powerful relationships between state revenues and readily available indicators show how state governments can assess their own outlook. Reasons for optimism for revenue recovery include an "economic bias toward surplus," driven by productivity gains and progressivity in state tax systems. The authors also suggest that some types of taxes are better than others if increased taxation is necessary.
(PDF, 64 K)

Michele Gambera

It’s a Long Way to Monte Carlo: Simulated Solutions of Commonly Used Financial Models Do Not Converge Very Quickly
This paper presents practical examples on how Monte Carlo simulation software must be evaluated for precision. The examples are from financial planning cases, but the relevance of the methodologies displayed here for other probabilistic problems, such as VaR and stress testing, is clear. Users must be comfortable not only with the assumptions of the models they use, but also with the reliability of percentiles, means, variances, and other moments of the final distributions that are produced by the software solving such models. Legal and reputation risks are the most obvious consequences of overlooking this issue.
(PDF, 85 K)

Robert Thomas Crow

What Works and What Does Not in Restructuring Electricity Markets: "Not Invented Here" is a Recipe for Disaster
The cost and reliability of electricity supply are critical to business, which means that business in general—as well as the ownership and management of electricity service providers—has an important stake in whether and how to restructure electricity markets. California’s failure in restructuring its electricity market is commonly interpreted to mean that “deregulation does not work.” However, a number of studies have pointed to flaws in the California experience that—if corrected—should allow restructuring to be successful. This study compares the California experience and the successful experience of several other states/countries to provide insights on issues that are critical for success. The analysis is organized around the control parameters that must be set for any electricity system seeking to restructure. Knowing what works as well as what does not will assist business leaders and government officials to promote and adopt policies that lead to efficient electricity markets.
(PDF, 104 K)

Economics at Work

Gary Raines

Economics At Work: Cotton Incorporated
(PDF, 44 K)

Focus on Industries and Markets

Andrew C. Gross and Edward D. Hester

The Global Electronic Components Industry
The long term global demand for electronic components will remain strong during the current decade, though growth will be slightly less robust than in the past ten years (9.0 percent vs. 10.5 percent per annum). Ongoing advances in information technology, expansion of the global Internet infrastructure, new generations of handheld and wireless devices, and rising electronic content in original equipment products are the key factors in the growth of shipments. The best prospects for sales will shift to developing countries and emerging markets. Demand growth will decelerate in the United States, but the long-suffering Japanese market will recover. High-end integrated circuit devices offer the best growth opportunities. The Asia-Pacific region will remain a strong net exporter, while all other regions will continue to be net importers of electronic components.
(PDF, 65 K)

Book Reviews

Edmund Mennis

Richard N. Cooper and Richard Layard editors. What the Future Holds: Insights from Social Science (2002)

Andrew C. Gross

Thomas P. Murtha, Stefanie A. Lenway, and Jeffrey A. Hart. Managing New Industry Creation. (2001)

(PDF, 56 K) Available to the public