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Volume 12, Issue No. 2, Decemeber 2005
Table of Contents
Main Articles
Money, Price Level and Output in the Chinese Macro Economy
Gregory C. Chow a and Yan Shen b
a Princeton University
b Peking University
Abstract
This paper studies the stability of monetary relations in the course of China's economic development. An error-correction model to explain inflation from 1954 to 2002 is presented that passes the Chow test of parameter stability in spite of substantial institutional changes. A VAR explaining the logs of the changes in the price level, output and money supply yields impulse responses that support the Friedman proposition that output reacts to money shocks first but the effect is short-lived and prices react later but the effect lasts longer. A similar VAR using US data shows the same pattern of impulse responses as the Chinese case, confirming the universality of the Friedman proposition.
JEL Classification: E3, O11
Keywords: China; macroeconomy; inflation; output; money |
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Timeliness and Conservatism of Taiwanese Earnings
Sudipta Basu a, Alex Yuan-Fu Huang b, Toshiaki Mitsudome c and Joseph Weintrop d
a Emory University
b Taiwan Institute of Economic Research
c Hunter College
d Baruch College
Abstract
Taiwan is an economy with an efficient stock market where accounting and auditing standards generally follow the US. However, a culturally different climate is caused by the predominance of family-owned public companies. We find Taiwanese firms' earnings exhibit the conservatism and timeliness of Asian economies where US GAAP is not used. Further tests show that family-controlled firms (typical of the Asian business model) exhibit less conservatism in their application of GAAP. This suggests limitations in the harmonization of accounting standards in those economies that have strong family influence in publicly traded firms.
JEL Classification: M41
Keywords: shareholder lawsuits; ownership structure; enforcement; ownership and control |
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Prior Beliefs and Posterior Assurance in a Sequential Audit Process
Suil Pae a and Jim Xie b
a Sungkyunkwan University
b Chinese University of Hong Kong
Abstract
This paper presents a model, in which an auditor is a priori unsure whether his client firm's financial statements are misstated. We derive the auditor's optimal decision rule in a multi-stage audit process and show that, under some regularity conditions, assurance - the posterior probability that the firm's financial statements are not misstated conditional on the auditor's attestation that they are not - is independent of the auditor's prior beliefs about potential misstatements in the financial statements. We also discuss how the model could be extended to settings in which a firm, an auditor, and financial statement users interact strategically.
JEL Classification: M41, D83
Keywords: multi-stage audit process; sequential decision making; assurance |
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Tourism, Employment and National Welfare
Mondher Sahli a and Bharat R. Hazari b
a Victoria University of Wellington
b City University of Hong Kong
Abstract
In this paper a two-sector general equilibrium model with a generalized minimum wage is presented to analyze the impact of expansion in tourism on employment and national welfare. On the basis of this model, several interesting results are obtained. First, an expansion in tourism necessarily improves the tertiary terms-of-trade. Second, and more importantly, expansion in tourism always increases employment. This is a significant result for many European countries which have rigid wage structures. Support for our results is also provided by data on employment for a selected set of European countries.
JEL Classification: F11, L83
Keywords: tourism; employment; general equilibrium model; terms of trade; national welfare |
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