Frontiers of economic research

Roger Farmer, Pawel Zabczyk, 26 October 2016

Ben Bernanke famously quipped that monetary policy works in practice, but not in theory. This column bridges the gap between practice and theory in assessing how central banks can influence both of them by intervening in asset markets. To the extent that asset market volatility is driven by shifts in beliefs, the central bank should aim to eliminate that volatility by engaging in countercyclical unconventional monetary policy, which would end up reducing the risk premium.

Kevin Bryan, 23 October 2016

Bengt Holmström has been jointly awarded the 2016 Nobel Prize in Economic Sciences with Oliver Hart “for their contributions to contract theory”. This column outlines his key contributions.

Lilia Mukhlynina, Kjell G. Nyborg, 23 October 2016

The valuation of firms, projects, and transactions directly affects investment decisions and the allocation of resources in the economy. But practitioners often dismiss 'academic' valuation techniques. This column uses a survey of valuation professionals to argue that the real-world choice of valuation methods is often arbitrary, and influenced more by professional subgroup than educational background. In which case, we should ask whether finance education beyond bachelor's degrees is merely a sideshow.

Julio J. Elias, Nicola Lacetera, Mario Macis, 15 October 2016

Certain ‘repugnant’ transactions, such as the sale of organs, are prohibited on moral grounds, despite substantial potential efficiency gains. This column uses a survey-based experiment to explore public perceptions of the morality–efficiency trade-off in the context of the US kidney procurement system. Respondents are found to accept higher levels of repugnance for higher levels of efficiency. These results suggest room for efficiency concerns alongside moral and ethical considerations.

Pierre Régibeau, Katharine Rockett, 13 October 2016

Systematic assessments of the research performance of academic institutions are increasingly common around the world. A key question for the design of such systems is whether and how bibliometrics should be incorporated. This column argues that bibliometrics can perform well at identifying quality in some fields, while providing cost-effective and transparent review. Peer review is found to be no guarantor of quality, though it may be essential in the evaluation of certain fields.

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