Although there has been much argument over the impact of variable inflation rates upon economic performance, there has been surprisingly little attempt to define the term "variability of inflation" carefully or to test proposed hypotheses connecting variability and the level of inflation. Precise definitions are given in the paper and a model is constructed showing that the level/variability hypothesis may be formulated in terms of the presence of heteroscedasticity in a regression model. This theoretical model is used to criticize existing studies, while an empirical study with Australian data illustrates the application of the approach.

In 1958, James Tobin generalized the Keynesian theory of liquidity preference by means of his famous portfolio model in which the demand for money (narrowly defined) is treated as behavior towards [interest] risk. Whatever merit this theory may have had then has long since been questionable. The reason is the existence of a large set of substitutes for money, typically short-term money market instruments, which can be regarded as riskless, or virtually so, and which pay substantial interest. The availability of these instruments would appear to make Tobin's theory that money is held to cope with interest risk resemble a scenario without a recognizable cast of actors. In the literature on monetary theory, other authors have also expressed misgivings about the Tobin theory by noting that savings and (nontransferable) time deposits have the same risk properties as money but pay interest (see, for example, Robert Barro and Stanley Fischer, 1976). Although correct, the allusion to these deposits is simplistic. It is true that while both types mimic money's freedom from interest risk in the conventional sense of capital loss, time deposits are still exposed to a kind of interest risk, because they can be liquidated before maturity only with interest penalty. More important, business firms are either denied access to savings deposits or, as in the United States, can hold a maximum of $150,000 (per account) at commercial banks, thereby effectively eliminating large firms as holders. Furthermore, although business firms can own most time deposits, they typically do not (except for negotiable CDs, a money market instrument); they are loath to tie up funds in long-term maturities, and they can usually obtain the same or higher yields on other types of short-term debt instruments that are also negotiable. In the United States, households have long accounted for about one-third of demand deposits, business firms owning most of the rest. Therefore any effort to rest a case against the Tobin theory of money demand on the existence of savings and time deposits gets at only a small part of the problem. This stricture extends to so-called NOW and ATS accounts. These interest-bearing demand deposits (disguised under other names) are also denied to business firms. For them, the short-term instruments of the money market are the principal alternative to money in asset portfolios.

Daniel H. Hill, Deborah A. Ott, Lester D. Taylor, James M. Walker, Incentive Payments in Time-of-Day Electricity Pricing Experiments: The Arizona Experience, The Review of Economics and Statistics, Vol. 65, No. 1 (Feb., 1983), pp. 59-65

A general equilibrium model of optimal employment contracts is developed where firms have better information about labor's marginal product than workers. It is optimal for the wage to be tied to the level of employment, to prevent the firm from falsely stating that the marginal product is low and cutting the wage. It is shown that an observed aggregate shock that leads to an interindustry shift in labor demand and that would have no effect on total employment under symmetric information leads to a reduction in employment when firms and workers have asymmetric information.

Introduction: Multinational Enterprise and Multinational Financial Management. PART ONE: ENVIRONMENT OF INTERNATIONAL FINANCIAL MANAGEMENT. The Determination of Exchange Rates. The International Monetary System. The Balance of Payments and International Economic Linkages. The Foreign Exchange Market. Currency Futures and Options Markets. Parity Conditions in International Finance and Currency Forecasting. PART TWO: FOREIGN EXCHANGE RISK MANAGEMENT. Measuring Accounting Exposure. Managing Accounting Exposure. Measuring Economic Exposure. Managing Economic Exposure. PART THREE: MULTINATIONAL WORKING CAPITAL MANAGEMENT. Financing Foreign Trade. Current Asset Management. Managing the Multinational Financial System. PART FOUR: FINANCING FOREIGN OPERATIONS. International Financing and International Financial Markets. Special Financing Vehicles. International Banking Trends and Strategies. The Cost of Capital for Foreign Investments. PART FIVE: FOREIGN INVESTMENT ANALYSIS. International Portfolio Investment. Corporate Strategy and Foreign Direct Investment. Capital Budgeting for the Multinational Corporation. The Measurement and Management of Political Risk. Glossary of Key Words and Terms in International Finance.