MONITORING ABSOLUTE AND RELATIVE POVERTY: “NOT ENOUGH” IS NOT THE SAME AS “MUCH LESS”

Financial poverty indicators assess which people have few financial resources and are thereby at risk of having an unacceptably low living standard. Most countries use one or several “official” poverty indicators, but they typically use either an absolute or a relative benchmark to determine what is unacceptable; absolute benchmarks are based on basic needs or rights while relative benchmarks depend on what is considered to be a “normal” living standard. Applying the absolute U.S. and the relative EU poverty indicators on the U.S. and 15 EU member states, this research shows that it makes sense to use both benchmarks.     

Earnings Management and Cultural Values

Using theory and empirical data from social psychology to measure for cultural differences between countries, this research studies the effect of individualism, defined as the degree to which individuals are integrated into groups ( Hofstede 1980 ), and egalitarianism, defined as a society's cultural orientation with respect to intolerance for abuses of market and political power ( Schwartz 1994, 2004 ) on earnings management. This research finds a significant cultural influence on earnings management. Specifically, the results show that countries scoring high on individualism tend to have lower levels of earnings management. Using the Schwartz (1994, 2004 ) framework, this study finds that egalitarianism is negatively related to earnings management. The analysis shows that, besides the formal investor protection, it is relevant to consider cultural differences to explain earnings management. This analysis also supports the idea that culture may be an important element in the discussion of global convergence towards a single corporate governance model, or the implementation of corporate governance codes inspired by codes from societies with different cultural values.     

Bank Finance versus Bond Finance

We present a model with agency costs where heterogeneous firms raise finance through either bank loans or corporate bonds and where banks are more efficient than the market in resolving informational problems. We document some major long‐run differences in corporate finance between the United States and the euro area, and show that our model can explain those differences based on information availability. The model fits the data best when the euro area is characterized by lower availability of public information about corporate credit risk relative to the United States, and when European firms value more than United States firms banks’ flexibility and information acquisition role.     

Consumer behaviour reflected in store and clothing selection criteria: a pilot study in Canada and England

Similarities and differences in selected clothing acquisition behaviour at two independent sites have been investigated using the Engel, Blackwell and Miniard consumer behaviour model as the conceptual framework. Similar clothing values orientations were found, supporting the assumption of a common Anglo-root culture at both sites. The paper focuses on an outcome of the values issue, namely store selection criteria and clothing evaluative criteria used by university students in Winnipeg, Canada and Newcastle upon Tyne, U.K. Respondents at both sites rated the store selection criteria and clothing evaluative criteria in similar orders of importance. Significant Spearman rank correlation coefficients for store selection criteria (r_s= 0-95) and clothing evaluative criteria (r_s= 0-88) suggest that the common Anglo-root culture of the Winnipeg and Newcastle participants has more influence on the alternative evaluative stage of the decision-making process than marketing stimuli and strategies found at each site. When individual criteria were compared across sites, only three of the ten store selection criteria gave statistically different responses, while three of the 21 clothing evaluative criteria were found to be statistically different.     

International Asset Pricing and Portfolio Diversification with Time-Varying Risk

We test the conditional capital asset pricing model (CAPM) for the world's eight largest equity markets using a parsimonious generalized autoregressive conditional heteroskedasticity (GARCH) parameterization. Our methodology can be applied simultaneously to many assets and, at the same time, accommodate general dynamics of the conditional moments. The evidence supports most of the pricing restrictions of the model, but some of the variation in risk-adjusted excess returns remains predictable during periods of high interest rates. Our estimates indicate that, although severe market declines are contagious, the expected gains from international diversification for a U.S. investor average 2.11 percent per year and have not significantly declined over the last two decades.     

REVIEW OF THE FINANCIAL AND ECONOMIC SITUATION IN SOUTH AFRICA*

I have pleasure in formally presenting to you the Final Accounts of the Bank, and the Reports of the Board and the Auditors, for the year ended 31st March 1969. I also submit to you the Bank's Annual Economic Report which describes in some detail the economic and monetary developments in South Africa during the year ended June 1969 and which in general serves as a background to my remarks today. As is customary, however, I will survey these developments very briefly before discussing the present situation and the prospects for the near future.