The standard-setters’ toolkit: can principles prevail over bright lines?

We study lease accounting in an international panel data set to examine how accounting outcomes vary with two features of accounting standards: the emphasis on using professional judgement to apply principles, and the presence or absence of bright-line tests. We study four countries—Australia, Canada, the UK, and the US—and companies in two lease-intensive industries—retail and transportation. Our primary study period spans the time when Australia and the UK switched from domestic to international accounting standards, and in one test, we also consider Canada’s transition to international standards. We find that neither an explicit requirement to apply a principle nor omitting bright-line tests materially increases the use of capital lease treatment among these firms. Overall, we conclude that this financial reporting outcome is relatively insensitive to these standard-setting tools.     

Data-mining,GIS and multicriteria analysis in a comprehensive method for bicycle network planning and design

In many Brazilian cities, the most common procedure for planning cycling networks is using aggregated population data in census tracts, which may not take into account the true origin and destination of trips. It may also not identify potential users of a particular mode of transport. This is particularly important considering that implementing cycling infrastructures should be based on the assumption that they are able to meet the users' needs. Therefore, the aim of this study is to develop and adopt an objective method to design and compare cycling networks based on data-mining of disaggregated origin-destination data, GIS resources, and multicriteria analysis techniques. The method follows three steps: 1) identifying potential users based on real user profiles, 2) designing proposed cycling networks and 3) a comparison between the networks proposed in this study and those developed by the municipality selected as a case study, considering real and potential users, as well as cost and benefit criteria. As a positive outcome, using disaggregated data allows for a reasonable estimate of the number of people served by the networks, a detailed analysis of their proximity to the infrastructure, as well as identifying potential users. Comparing cycling networks considering cost and benefit criteria shows that the chosen criteria were effective. It was also determined that the cycling network of the studied city poorly serves bicycle transport users, if compared to the proposed networks. These findings indicate that appropriate methods for planning cycling networks are still needed.     

The Log of Gravity at 15

Portuguese Economic Journal - We review the contribution of “The Log of Gravity” (Santos Silva and Tenreyro, Rev Econ Stat 88:641–658, 2006), summarize the main results in the...     

Is there a role for uncertainty in forecasting output growth in OECD countries? Evidence from a time-varying parameter-panel vector autoregressive model

This paper uses a time-varying parameter-panel vector autoregressive (TVP-PVAR) model to analyze the role played by domestic and US news-based measures of uncertainty in forecasting the growth of industrial production of 12 Organisation for Economic Co-operation and Development (OECD) countries. Based on a monthly out-of-sample period of 2009:06 to 2017:05, given an in-sample of 2003:03 to 2009:05, there are only 46% of cases where domestic uncertainty can improve the forecast of output growth relative to a baseline monetary TVP-PVAR model, which includes inflation, interest rate and nominal exchange rate growth, besides output growth. Moreover, including US uncertainty does not necessarily improve the forecasting performance of output growth from the TVP-PVAR model which includes only the domestic uncertainty along with the baseline variables. So, in general, while uncertainty is important in predicting the future path of output growth in the 12 advanced economies considered, a forecaster can do better in majority of the instances by just considering the information from standard macroeconomic variables.     

Drivers of the real effective exchange rates in high and upper‐middle income countries

This paper revisits the nexus between real effective exchange rate (REER) and total factor productivity (TFP) by controlling for trade openness, financial development and natural resources rents. We use a sample of 60 high‐income and upper‐middle income countries over the period 1995–2015 and employ the GMM estimation framework. Our results advance the empirical knowledge on the drivers of REER by providing robust evidence that the impact of TFP is not uniform across different country clusters. We find that in high‐income countries, increasing productivity causes the REER to depreciate hence becoming more trade competitive while the opposite is true for upper‐middle income countries. Furthermore, financial development and natural resources rents have no meaningful impact in the case of upper‐middle income countries but retain a significant effect in high‐income countries. Trade openness plays a key role in explaining the variation in REER in both country clusters.     

National levels of corruption and foreign direct investment

We model the relationship between bilateral foreign direct investment (FDI) and the level of corruption in multinational firms’ (MCNs’) home and host countries. We construct and test a model of bilateral FDI between countries that differ in their levels of corruption. FDI is affected negatively both by the level of corruption in the host country and by differences in home- and host-country corruption. Our model emphasizes that MNCs develop skills for dealing with home-country corruption, and these skills become a competitive advantage in similarly corrupt host countries. We test the model using data on bilateral FDI stocks among a large number of home and host countries, using a variety of specifications and estimation strategies to provide robustness. Our results show that the effects of host-country corruption and of differences in corruption levels between home and host countries are statistically and economically significant.     

Bias-corrected estimates of reduction of post-surgery length of stay and corresponding cost savings through the widespread national implementation of fast-tracking after liver transplantation: a quasi-experimental study

Background: Fast-tracking is an approach adopted by Mayo Clinic in Florida’s (MCF) liver transplant (LT) program, which consists of early tracheal extubation and transfer of patients to surgical ward, eliminating a stay in the intensive care unit in select patients. Since adopting this approach in 2002, MCF has successfully fast-tracked 54.3% of patients undergoing LT.

Objectives: This study evaluated the reduction in post-operative length of stay (LOS) that resulted from the fast-tracking protocol and assessed the potential cost saving in the case of nationwide implementation.

Methods: A propensity score for fast-tracking was generated based on MCF liver transplant databases during 2011–2013. Various propensity score matching algorithms were used to form control groups from the United Network of Organ Sharing Standard Analysis and Research (STAR) file that had comparable demographic characteristics and health status to the treatment group identified in MCF. Multiple regression and matching estimators were employed for evaluation of the post-surgery LOS. The algorithm generated from the analysis was also applied to the STAR data to determine the proportion of patients in the US who could potentially be candidates for fast-tracking, and the potential savings.

Results: The effect of the fast-tracking on the post-transplant LOS was estimated at approximately from 2.5 (p-value?=?0.001) to 3.2 (p-value?Conclusion: The fast-track program was found to be effective in reducing post-transplant LOS, although the reduction appeared to be less than previously reported. Nationwide implementation of fast-tracking could result in substantial cost savings without compromising the patient outcome.     

Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom

While substantial revisions to auditor reporting requirements are being implemented internationally, the impact of these reforms on financial reporting quality is unknown. We exploit the United Kingdom's recent auditor reporting changes and find that the United Kingdom's new reporting regime is associated with an improvement in financial reporting quality as proxied by significant decreases in absolute abnormal accruals and the propensity to just meet or beat analyst forecasts, and a significant increase in earnings response coefficients. As for audit costs, we do not find a significant change in audit fees or audit delay surrounding the implementation of the new reporting regime. Taken together, the results of this study suggest that new auditor reporting requirements are associated with a significant improvement in financial reporting quality without detecting a significant increase in audit costs.     

Auditing Goodwill in the Post‐Amortization Era: Challenges for Auditors

The elimination of goodwill amortization in 2001 brought about significant change in how companies are required to account for goodwill. This change in accounting also brought with it new challenges for auditors, namely evaluating the reasonableness of management's assumptions related to goodwill valuation. In addition to introducing technical challenges, this task is particularly difficult given the misalignment in incentives it creates between managers who likely prefer to avoid recording an impairment and auditors who seek to minimize the bias in management's impairment testing. This study focuses on the consequences of the misaligned incentives that auditors face under the current goodwill assessment process. We find that the decision to record a goodwill impairment is associated with an increase in the probability of auditor dismissal. Consistent with the presence of significant friction with clients, our results also indicate that the likelihood of auditor dismissals is negatively related to the favorability of the impairment decision. Furthermore, we find that companies impairing goodwill prior to dismissing auditors subsequently employ auditors that are, on average, more favorable to clients in their impairment decisions.     

Once NEET,always NEET? A synthetic panel approach to analyze the Moroccan labor market

In many regions of the world, the persistent, and growing, proportion of young people who are currently Not in Employment, Education or Training—a group increasingly referred to as NEET—is of global concern. This is no less true of Morocco: about 30% of the Moroccan population between age 15 and 24 are currently NEET. Drawing from various rounds of Moroccan Labor Force Surveys, this paper contributes to understanding the complex dynamics of labor markets in developing countries. First, it identifies the socioeconomic determinants of Morocco's NEETs. Second, employing a synthetic panel (SP) methodology in the context of labor market analysis, the paper describes how the condition of NEETs changes over time. One striking, and worrisome, pattern that emerges from the 2010 SP data is that, even after 8 years, a majority of the NEETs remained outside either the labor market or education, with very little chance of moving out of their situation. Their chronic stagnancy confirms the powerful effect that initial conditions have on determining young people's future outcomes. It also highlights the absence of corrective mechanisms and policy interventions within the Moroccan political economy landscape that could help to change NEETs' outcomes along the line.