FOREIGN EXCHANGE RATE EXPECTATIONS: SURVEY AND SYNTHESIS

Abstract.  This paper reviews the empirical literature on foreign exchange rate expectations. Prominent issues are the forward premium puzzle, expectations formation in financial markets, heterogeneity of expectations, market microstructure, time-varying risk premiums and forecast performance. Although much has been learned in each field, this survey highlights the areas of research in which our understanding of the mechanism of exchange rate expectations is still incomplete. Our survey suggests that both irrational expectations and time-varying risk premiums account for the forward discount anomaly, that long-term expectations reverse towards their long-run equilibrium values and that heterogeneous behaviour of market participants has the potential of explaining some of the empirical regularities in the international finance literature.     

Industry competition and firm human capital

This paper argues that objective and subjective human capital may have substantial impact upon organizational performance in a competitive context. Objective human capital pertains to such features as education and experience, whereas subjective human capital relates to personality characteristics. The argument is illustrated by presenting the results of two empirical studies: (1) a cross-section 1990–1991 analysis of about 50 incumbents in the Flemish furniture industry-concentrating on the impact of subjective human capital, particularly the Chief Executive Officer's (CEO's) locus-of-control personality, on financial performance; and (2) a longitudinal 1970–1992 analysis of a cohort of 100 entrants into the Dutch audit industry-focusing on the influence of objective human capital, particularly education and experience, on exit by merger and acquisition (M&A) or diaspora. Both studies support the claim that objective and subjective human capital matters: for example, Flemish furniture firms headed by a CEO with an internal locus-of-control trait reach higher levels of financial performance, and Dutch audit firms with a high proportion of personnel with business experience are more likely to exit the industry over the years as a result of diaspora. Finally, the data of the Flemish furniture and Dutch audit industries are re-analyzed so as to compare the impact of human capital variables on small-firm performance in both industries. This re-analysis reveals that in both industries the impact of human capital variables is more pronounced in large firms compared to small businesses.     

Christ and business: A typology for Christian business ethics

H. Richard Niebuhr's typology of the relation between Christ and culture can function as a heuristic device to identify different approaches to Christian business ethics. Five types are outlined: Christ Against Business, The Christ of Business, Christ Above Business, Christ and Business in Paradox, and Christ the Transformer of Business. This typology may facilitate discussion on the relative adequacy of various theological assumptions about ethical change in business. Louke Siker received her Ph.D. in Religion and Society from Princeton Theological Seminary in 1987 (dissertation: Interpreting Corporate Cultures: Philosophical and Theological Reasons for Doing Business Ethics in a Hermeneutical Mode). She has taught Christian ethics and business ethics at Wake Forest University and Loyola Marymount University. Her research interests include methodology in business ethics. She is the author of An Unlikely Dialogue: Barth and Business Ethicists on Human Work, Annual of the Society of Christian Ethics, 1989.     

African religion and development

Development must be seen as a response to the total context of a given community. This response is determined by external factors ‐ the context ‐ and by internal factors, such as the world‐view, the thought structures, the pattern of meaning, and the basic religious convictions of the community. These internal factors are also influenced by the context ‐ there is a process of interaction between internal and external factors — but their effect on the context is often underestimated.

Traditional African culture is deeply religious, and the central motive in this culture has often been described as the search for unity, harmony, balance, continuity, synthesis and community. The effect of this basic religious motive can be seen in the impact of group consciousness, the relation to the earth, the reaction to the Western city, and the conception of time. In each instance, it has a profound effect on African development perceptions, and it can often explain the negative response to Western culture that can be observed, for example, in many works of modem African writers.     

Book Reviews

Howard Dick, The Indonesian Interisland Shipping Industry: An Analysis of Competition and Regulation, Singapore: Institute of Southeast Asian Studies, 1987, pp. 217. Paper: US$15.00; Cloth: US$23.00.

Anne Booth, Agricultural Development in Indonesia, Sydney, Wellington and London: Allen and Unwin, 1988, pp. 295 + iv.

Arthur van Schaik, Colonial Control and Peasant Resources in Java, Amsterdam; University of Amsterdam, Institute For Social Geography, 1986, pp. 210.

Joan Hardjono, Land, Labour and Livelihood in a West Java Village, Jogyakarta: Gadjah Mada University Press, 1987.

W. Röll and A. Leemann, Agrarprobleme auf Lombok: Untersuchungen zur Wirtschafts- und Sozialstruktur in Nusa Tenggara Barat, Indonesien (Agricultural Problems on Lombok: Studies of Economic and Social Structure in West Nusa Tenggara, Indonesia), Hamburg: Institut Für Asienkunde, 1987, pp. 300.

Hal Hill (ed.), Unity and Diversity: Regional Economic Development in Indonesia Since 1970, Singapore: Oxford University Press, 1989, pp. 610 + xxx. Cloth: A$65.00.

C. P. Timmer (ed.). The Corn Economy of Indonesia, Ithaca: Cornell University Press, 1987, pp. 302. Cloth: US$32.95.

Thee Kian Wie, Industrialisasi Indonesia: Analisa dan Catalan Kritis (Indonesian Industrialisation: Analysis and Critical Notes), Jakarta: Pustaka Sinar Harapan, 1988, pp. 276.

David Joel Steinberg (ed.), In Search of Southeast Asia: A Modern History, Honolulu: University of Hawaii Press, 2nd Ed., 1987, pp. 590 + xi.

Geoffrey B. Hainsworth, Innocents Abroad or Partners in Development? An Evaluation of Canada-Indonesia Aid, Trade and Investment Relations, Singapore: Institute of Southeast Asian Studies, Field Report Series No. 15, 1986, pp. 100

BRIEFLY NOTED: Ronald G. Petocz (Compiler), The Ecology of Irian Jaya: A Preliminary Bibliography, Halifax N.S., Canada: School For Resource and Environmental Studies, Dalhousie University, 1988.     

Ethics matters: the integration of ethical considerations in management accounting textbooks

This paper examines the integration of ethical considerations in management accounting (MA) education. Drawing on the work of Alisdair MacIntyre, it is argued that MA instruments such as performance measurement are not morally neutral, but instead bear moral implications. Therefore, this paper contends that MA students should be trained to take these moral implications into consideration alongside MA's technical aspects. A content analysis is carried out to examine the integration of ethical considerations in top-ranked MA textbooks. The findings indicate that these textbooks, particularly the introductory textbooks, marginally integrate ethical considerations. Furthermore, the findings point to the risk of detaching ethical considerations from the discussion of MA's technical aspects, which may weaken the potential of the ethical considerations and turn them into ‘afterthoughts’. Finally, this paper offers practical suggestions for the improvement of the integration of ethical considerations in MA education and concludes with directions for future research.     

The Development of Inequality and Poverty in Indonesia, 1932–2008

We estimate inequality in Indonesia between 1932 and 2008. Inequality increased at the start of this period but declined sharply from the 1960s onwards. The increase was due to a shift from domestic to export agriculture over the period up to the Great Depression. During the 1930s, as the price of export crops declined, the income of rich farmers suffered a blow. Yet this was counterbalanced by an increasing gap between expenditures in the urban and rural sectors, causing an overall rise in inequality. As for the second half of the century, we find that the employment shift towards manufacturing and services—combined with an increase in labour productivity in agriculture—accounts for inequality’s decline, which was halted in the 1990s. These inequality trends affected poverty as well, but prior to the 1940s the negative impact of the rise in inequality was offset by an increase in per capita GDP. Between 1950 and 1980 a decline in inequality, combined with increased per capita GDP, rapidly raised a large portion of the population above the poverty line.