Bulletin 11 OCTOBER 1985

IN THIS ISSUE...

We resume our normal publication schedule in this issue of the Bulletin. In a lead article, Research Fellow Grayham Mizon argues that econometric models must undergo thorough and critical evaluation if they are to be widely accepted as the basis for policy-making. The Bulletin also includes a report of the week- long conference on corporate finance, held in Oxford in September under the auspices of the ESRC and the Centre's ATE programme. The UK and the international economy also feature prominently, in reports of an international economics workshop in Stockholm and lunchtime meetings held in London to discuss the recent report of the House of Lords Select Committee on the UK balance of trade deficit in manufactures, and the parallels between the international debt crises of the 1930s and the 1980s.

Econometric Model Evaluation

Grayham Mizon argues that econometric models must establish their credentials and must undergo more critical, rigorous and thorough evaluation if they are to be accepted for policy-making. Although no modelling strategy is likely to be sufficient to produce good models, he outlines procedures for good model design which have proved useful in practice. Models should be designed so that they are 'congruent' with all available data, and Mizon also advocates the use of the 'encompassing' principle in model evaluation.

Corporate Finance

The rapid evolution of financial markets has led to increased interest in corporate structures and their interaction with financial markets and the tax system. This was the subject of an ESRC/CEPR conference held in September.

International Economics

The themes of policy conflict and coordination in the international economy were the focus of a September workshop held in Stockholm, organised by CEPR and the Institute for International Economic Studies. Economic security was a significant theme of the proceedings.

Select Committee on Overseas Trade

The House of Lords Select Committee on Overseas Trade recently published its report on the UK balance of trade deficit in manufactures. Alasdair Smith, Co-director of CEPR's International Trade programme, discussed the report at a lunchtime meeting on the day of publication. He found much to praise in its analysis but criticized some of its recommendations.

International Debt: 1930s & 1980s

The international debt crisis has preoccupied policy-makers in the 1980s. Debt servicing failures were common in the 1930s. Are there any useful parallels between the two periods? CEPR Director Richard Portes discussed the lessons of the 1930s at an October lunchtime meeting.


Discussion Papers

If a government cannot commit itself to carry out an announced policy, the policy may lack credibility. David Backus and John Driffill analyze how credibility and commitment affect the design of anti-inflation policy .

Heather Joshi and Sue Owen find little evidence of a 'discouraged worker' effect among women in the UK labour force .

Sweder van Wijnbergen suggests why the responses of Europe, the US and the LDCs to the 1973/4 oil price shock were so different.

Tim Hatton surveys research on unemployment and the workings of the interwar labour market in the UK.

David Newbery and Joseph Stiglitz examine whether implicit contract theory can contribute to explanations of unemployment.

Sanford Grossman and Oliver Hart discuss the relationship between the 'costliness' of contracts and the extent of firms' horizontal and vertical integration .

Migration may be due to differences between national wage levels, but these wage levels may in turn be affected by the migration . Patrick Geary and Cormac O Grada analyze the causal relationship using data from 1820-1977.

Tony Venables surveys the contribution that modern theories of industrial organisation can make to our understanding of international trade.