A MACROECONOMIC PERSPECTIVE OF AFTA'S PROBLEMS AND PROSPECTS

The Association of Southeast Asian Nations (ASEAN) and the impressive economic performance of most of its members have increased the weight of the region's views in world fora. However, ASEAN has been unsuccessful in fostering a regional integration arrangement (RIA) leading to an increase in intraregional trade and foreign direct investment. In January 1992, ASEAN launched the Asean Free Trade Area (AFTA) seeking to establish a free trade area (FTA) by 2008.
Market integration increases economic interdependence and thereby raises the need for policy integration and discipline. This paper argues that a number of difficulties that ASEAN faced in promoting intraregional trade are likely to continue to affect AFTA (e.g., low economic complementarity and macroeconomic imbalances requiring large changes in equilibrium real exchange rates). The experience of other RIAs suggests other potential problems.
AFTA's prospects of evolving into deeper forms of sustainable integration are remote. Some cooperation in areas of common interest seems likely.     

Cross‐Border Auction Cycle Effects of Sovereign Bond Issuance in the Euro Area

We provide evidence for the euro area of spillovers from foreign public debt auctions into domestic secondary‐market auction cycles. We also confirm existing evidence of such spillovers from domestic issues into the domestic secondary market. Consistent with a theory of primary dealers’ limited risk‐bearing capacity, we find that auction cycles from domestic issues are stronger during the recent crisis period, whereas cross‐border effects are stronger in the precrisis period, but this evidence is not strong. This finding likely reflects the opposing effects of reduced sovereign bond market integration during the crisis and higher yield covariances caused by more market volatility.     

MODELING THE INCIDENCE OF SELF‐EMPLOYMENT: INDIVIDUAL AND EMPLOYMENT TYPE HETEROGENEITY

Modeling the incidence of self‐employment has traditionally proved problematic. Although the supply‐side characteristics of the self‐employed are well documented, we argue that the literature has neglected demand‐side aspects. We explore the determinants of self‐employment using the U.S. Survey of Consumer Finances. We present results from an econometric framework that allows us to model, separately and simultaneously, the influences of individual heterogeneity (i.e., supply‐side factors) and employment type heterogeneity (i.e., demand‐side factors) on the probability of self‐employment. Our findings suggest that while individual characteristics are important determinants of self‐employment, there are factors specific to the type of employment that influence self‐employment. (JEL J23, J33, C25, C10)     

Partial Regulation in Vertically Differentiated Industries

We provide theoretical foundations for quality‐adjusted price‐cap regulation in industries where a regulated incumbent and an unregulated entrant offer vertically differentiated products competing in price and quality. We show that, whether or not the incumbent anticipates the reaction of the entrant, the optimal weights in the cap depend upon the market served by the entrant, despite the latter not being directly concerned by regulation. We further show that the cap is robust to small errors in the weights. Our findings point to the conclusion that, in partially regulated industries, regulators should use information about the whole sectors rather than on the sole regulated incumbents.     

Depression dynamics: a new estimate of the Anglo‐American manufacturing productivity gap in the interwar period1

During the interwar period the manufacturing productivity gap between the US and the UK became much larger than existing estimates suggest. In this article a new comparison of US/UK productivity levels for 1935 is presented, utilizing a more rigorous methodology to revise the widely used, but methodologically outdated, benchmark comparison by Rostas that was published in 1948. Secondly, the comparison is extended to take account of variations in input prices, and it is shown that double deflation has a substantial effect on the new benchmark, particularly at the industry level. Thirdly, labour input is adjusted for actual hours worked. US manufacturing displayed a much higher level of comparative productivity for the key industries of the second industrial revolution, such as chemicals and engineering. These results support revisionist accounts of the depression's strengthening of US productivity leadership.     

Audit Analytical Procedures: A Field Investigation*

Abstract. Analytical procedures have become an increasingly important part of financial statement auditing over the last 10 years. First recommended for audits by the Auditing Standards Board in 1978, analytical procedures are mandated for planning and overall review purposes by Statement on Auditing Standards (SAS) No. 56. In response to increased concerns about audit efficiency and effectiveness, analytical procedures are increasingly being used in place of and as a supplement to substantive tests of details. Despite their increased use, little is known about how analytical procedures are performed in practice. The purpose of this study is to describe how auditors perform analytical procedures at the planning, substantive testing, and overall review stages of the audit. To accomplish this, we conducted a series of interviews with 36 audit professionals at various levels of experience and responsibility (i.e., seniors, managers, and partners) representing all the U.S. Big Six accounting firms. The contributions of our study are threefold. First, by contributing to a more complete understanding of how analytical procedures are performed, we provide the basis for accounting researchers to identify current analytical procedure problems/issues and, thus, perform more relevant research. Second, we provide the Auditing Standards Board members with relevant information about current practice for their deliberations on revised guidance for analytical procedures. Third, we provide educators with a characterization of analytical procedures as performed in practice, thereby facilitating their classroom coverage of this important topic. Résumé. Depuis une dizaine d'années, les procédés analytiques jouent un rôle de plus en plus important dans la vérification des états financiers. D'abord recommandés en 1978 par l'Auditing Standards Board pour les vérifications, les procédés analytiques sont exigés par le Statement on Auditing Standards (SAS) n° 56 pour la planification et l'examen global. Compte tenu des préoccupations accrues que soulèvent l'efficience et l'efficacité de la vérification, l'on fait de plus en plus appel aux procédés analytiques en remplacement et en complément des procédés de corroboration détaillés. Malgré cette utilisation croissante, le mode d'application concrète des procédés analytiques est peu connu. Les auteurs se sont donné pour but de décrire comment les vérificateurs appliquent les procédés analytiques aux étapes de planification, d'application des procédés de corroboration et d'examen global de la vérification. Pour y parvenir, ils ont procédé à une série d'entrevues avec 36 experts de la vérification possédant divers degrés d'expérience et assumant divers niveaux de responsabilités (premiers vérificateurs, chefs de groupe et associés), qui représentaient les six principaux cabinets d'experts comptables des États-Unis. L'étude contribue à l'avancement des connaissances de trois façons. Premièrement, en permettant de mieux comprendre comment les procédés analytiques sont appliqués, elle munit les chercheurs en comptabilité des éléments nécessaires au diagnostic des problèmes ou des questions actuellement soulevés par les procédés analytiques et, partant, à la réalisation de travaux de recherche plus pertinents. Deuxièmement, elle offre aux membres de l'Auditing Standards Board de l'information pertinente relative aux méthodes courantes afin d'alimenter les délibérations relatives à l'orientation à donner aux procédés analytiques. Troisièmement, elle munit les enseignants d'une définition des procédés analytiques tels qu'ils sont appliqués concrètement, ce qui facilitera l'étude de cette importante question en classe.     

Do Consumers Care about Ethics? Willingness to Pay for Fair‐Trade Coffee

Consumers’ buying behavior is not consistent with their positive attitude toward ethical products. In a survey of 808 Belgian respondents, the actual willingness to pay for fair‐trade coffee was measured. It was found that the average price premium that the consumers were willing to pay for a fair‐trade label was 10%. Ten percent of the sample was prepared to pay the current price premium of 27% in Belgium. Fair‐trade lovers (11%) were more idealistic, aged between 31 and 44 years and less “conventional.” Fair‐trade likers (40%) were more idealistic but sociodemographically not significantly different from the average consumer.