Compensation and Firm Performance

Ronald Ehrenberg and George T. Milkovich

No 2145, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper uses stochastic simulation and my U.S. econometric model to examine the optimal choice of monetary policy instruments. Are the variances, covariances, and parameters in the model such as to favor one instrument over the other, in particular the interest rate over the money supply? The results show that the interest rate and the money supply are about equally good as policy instruments in terms of minimizing the variance of real GNP. The variances of some of the components of GNP are, however, much larger when the money supply is the policy instrument, as is the variance of the change in stock prices. Therefore, if one's loss function is expanded beyond simply the variance of real GNP to variances of other variables, the interest rate policy does better. The results thus provide some support for what seems to be the Fed's current choice of using the interest rate as its primary instrument. Stochastic simulation is also used to estimate how much of the variance of real GNP is due to the error terms in the demand for money equations. The results show that the contribution is not very great even when the money supply is the policy instrument.

Date: 1987-02
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as Ehrenberg R.G. and G.T. Milkovich."Compensation and Firm Performance," Human Resources and the Performance of Firms, eds. M. Kleiner et al. Madison, Wisconsin: Industrial Relations Research Association, (1987).
Published as Shared Modes of Compensation and Firm Performance U.K. Evidence , Martin Conyon, Richard B. Freeman. in Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980–2000 , Card, Blundell, and Freeman. 2004

Downloads: (external link)
http://www.nber.org/papers/w2145.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:2145

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2145

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().