What is the Relationship Between Audit Partner Busyness and Audit Quality?

Contemporaneous studies generally find a negative relationship between audit partner busyness (APB), measured as the number of clients in an audit partner's portfolio, and audit quality. Their argument is that a busy partner does not devote sufficient time to properly audit his average client. Contrary to these studies, we argue that when busyness is optimally chosen by the partner, in equilibrium, there is no causal relationship between APB and audit quality. Using Australian data for the 1999–2010 period, we show that APB is not reliably linked to audit quality, consistent with this equilibrium theory. We argue that causality can be ascribed to the APB‐audit quality relationship when accounting scandals exogenously shocked the Australian audit market during the 2002–04 period and APB likely deviated from optimum levels. Supporting this disequilibrium view, we find that higher APB reduces a partner's propensity to issue first‐time going‐concern opinions during this period. Our evidence highlights the importance of the equilibrium condition in testing empirical associations between audit outcomes and endogenous auditor attributes, and shows that the detrimental effect of APB on audit quality is not as pervasive as contemporaneous studies suggest.     

Capital Surges and Credit Booms: How Tight is the Relationship?

It has been frequently argued that surges in capital inflows are a major cause of credit booms and banking crises in emerging market economies. This view suggests that there is little role that can be played by domestic policy to break this linkage. This need not be the case. We show that the linkage between surges and booms is not as strong as is often assumed. One problem with most previous studies is that a wide range of measures for both surges and booms has been used with little checking of the robustness of results. We deal with this issue by replicating 14 different measures of capital surges (gross and net) and 5 credit boom proxies from the literature on a sample of 46 countries from 1981–2010. A second difficulty is that some previous studies have not distinguished between the proportions of surges followed by booms and booms preceded by surges. We found substantial differences between these two relationships. While there is a good deal of variation in the individual correlations the vast majority of the calculated probabilities of a surge being followed by a credit boom fall within the range of 4 % to 13 %. Although the proportion of credit booms preceded by surges is higher, the correlations for both directions are much lower than are frequently assumed. While the probabilities of a surge being followed by a credit boom generally increased from the 1980s to the 1990s they fell again in the 2000s, suggesting the possibility that authorities have become better at limiting the adverse effects of surges on domestic credit growth.     

How is the Asian economy recovering from COVID-19? Evidence from the emissions of air pollutants

This study examines how economic and social activities in Asia were affected by the COVID-19 pandemic, using the emissions of various air pollutants as representative measures of those activities. Our review of emissions data suggests that the amount of air pollutants emitted decreased in most subnational regions from 2019 to 2020. We also determined that economic and social activities have restarted in some regions in many countries. Moreover, we conduct regression analyses to identify the types of regions that restarted earlier. Regional characteristics are distinguished by employing a remotely sensed land cover dataset and OpenStreetMap. Results reveal that in the case of the Association of Southeast Asian Nations (ASEAN) forerunners, economic and social activities in cropland, industrial estates, accommodations, restaurants, education, and public services have not yet returned to previous levels.     

The Relationship Between Firm Productivity,Wage Level and Employees’ Age: A Sectoral Perspective

De Economist - We examine how a firm’s productivity level, wage level and productivity–wage gap are related to the age composition of its employees. Panel data of Norwegian firms in the...     

Is the Relationship of Wealth Inequality with the Real,Financial and Housing Cycle Country-Specific?

Atlantic Economic Journal - Relying on the methodology of deviation cycle dynamics, we analyze whether the association of wealth inequality measures and the real, financial and housing cycle are...     

Are ‘New’ Donors Different? Comparing the Allocation of Bilateral Aid Between nonDAC and DAC Donor Countries

Major DAC donors are widely criticized for weak targeting of aid, selfish aid motives, and insufficient coordination. The emergence of an increasing number of new donors may further complicate the coordination of international aid efforts. At the same time, it is open to question whether new donors (many of which were aid recipients until recently) are more altruistic and provide better targeted aid according to need and merit. Project-level data on aid by new donors, as collected by the AidData initiative, allow for empirical analyses comparing the allocation behavior of new versus old donors. We employ Probit and Tobit models and test for significant differences in the distribution of aid by new and old donors across recipient countries. We find that, on average, new donors care less for recipient need than old donors. New and old donors behave similarly in several respects, however. They disregard merit by not taking the level of corruption in recipient countries into account. Concerns that commercial self-interest distorts the allocation of aid seem to be overblown for both groups.     

The Relationship Between Government Policy and Financial Performance： A Study on the SMEs in Iraq

The study examined the relationship between government policies and financial performance in small and medium enterprises （SMEs） in Iraq. The study aimed at establishing the relationship between government policies and financial performance of SMEs. In the Republic of Iraq, it is estimated that 99% of the business entities are SMEs. They also contribute to GDP and provide employment. Notwithstanding the recognition of the important roles SMEs play in Iraq, their development is largely constrained by a number of factors, such as the existence of laws, regulations, and rules that impede the development of the sector. The study provided some relevant recommendations to policy makers, development agencies, entrepreneurs, and SME managers to ascertain the appropriate strategy to improve the SME sector in Iraq.     

A Note on the Labor Market Effects of Remittances in Latin American and Caribbean Countries: Do Thresholds Exist?

The labor market effects of remittances have long been examined in the empirical literature. To date, the results have been mixed: some authors observe a negative association between remittances and unemployment while others report that remittances increase unemployment. This study empirically examines the impact of remittances on unemployment using macroeconomic data for a sample of 18 Latin American and Caribbean countries. Specifically, the study tests whether there is a nonlinear relationship between the variables. Results suggest that when the remittance‐to‐GDP ratio is low, remittances have a positive and significant impact on unemployment. However, as they increase, remittances are negatively associated with unemployment. This suggests the possibility that estimations based on the assumption of a linear relationship between remittances and labor may mask the true relationship between the variables.     

Is the COVID-19 pandemic more contagious for the Asian stock markets? A comparison with the Asian financial,the US subprime and the Eurozone debt crisis

The ongoing COVID-19 pandemic has sent shock waves across the global stock markets. Several financial crises in the past too have had a global impact with their reach extending beyond the country of origin. The current study compares the contagion effect of four such crises viz. the Asian financial crisis, the US subprime crisis, the Eurozone debt crisis, and the currently ongoing Covid-19 crisis on Asian stock markets to understand which of these has had the most severe impact. It finds that among all the four crises, the US subprime crisis has been the most contagious for the Asian stock markets. The study also highlights the difference between severities of a liquidity crisis versus a real crisis and identifies the markets that remained insulated from all these crises, a finding which will be useful for portfolio managers in devising their asset allocation.     

Fuelling the urban economy: A comparative study of energy in the Low Countries, 1600–1850

What was the role of energy in shaping modern economies and fuelling the transition to sustained economic growth? In the historiography on the industrial revolution, the transition to fossil energy carriers plays a central role. Despite recent efforts to gather new empirical evidence, long-term comparative studies on energy transitions and their economic impact before and during the first industrial revolution remain rare. As a contribution to this literature, this article presents new quantitative data on energy consumption from the seventeenth to the nineteenth centuries in the Low Countries. To explore differences in the chronology and impact of energy transitions, we compare the total levels of energy consumption, the energy mix, and the prices of fuels between two cities in the northern and southern Low Countries: Leiden and Ghent. This analysis enables us to explore more clearly which factors played a key role in the interaction between energy, economic growth, and industrialisation. The transition towards a cheap-energy economy in Holland was associated with economic growth, but not with mechanisation. On the other hand, the rapid mechanisation process in Ghent was associated not with a cheap-energy economy (relative to that of Leiden), but more specifically with a cheap-coal economy.     

The Fisher Effect Puzzle: A Case of Non-Linear Relationship?

The Fisher effect specifies a positive, one-for-one relationship between the nominal interest rate and expected inflation. Most recent empirical studies on the Fisher equation, typically based on ordinary least squares and co-integration estimation, found that the equation did not fit various data sets well. However, recent empirical studies showed that this fit improves if the Fisher equation is treated as a non-linear equation. Using U.S. quarterly data, this paper examines whether the results of the previous studies on the Fisher equation arose as a direct consequence of specification errors. We use time-varying coefficient (TVC) estimation, a procedure that allows us to directly confront the unknown functional form problem, specification errors, and spurious relationships. We find strong support for the view that, under TVC estimation, the Fisher equation holds and is no longer a puzzle.     

Why Are There Rich and Poor Countries? Symmetry Breaking in the World Economy: A Note

This paper extends K. Matsuyama (1996, Journal of the Japanese and International Economies, 10, 419–439) to allow for the presence of a fixed factor such as land. By assuming that agricultural production is more land-intensive than manufacturing production, we generalized Matsuyama's results on symmetry breaking in the world economy. That is, international trade by causing an agglomeration of economic activities in different countries of the world makes inevitable the coexistence of rich and poor. J. Japan. Int. Econ. June 1999, 13(2), pp. 140–149. Department of Economics, Tufts University, Medford, Massachusetts 02155. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: F12 and O12.     

Slow Pass-through Around the World: A New Import for Developing Countries?

Developing countries traditionally experience pass-through of exchange rate changes that is greater and more rapid than high-income countries experience. This is true equally of the determination of prices of imported goods, prices of local competitors’ products, and the general CPI. But developing countries in the 1990s experienced a rapid downward trend in the degree of pass-through and speed of adjustment, more so than did high-income countries. As a consequence, slow and incomplete pass-through is no longer exclusively a luxury of industrial countries. Using a new data set—prices of eight narrowly defined brand commodities, observed in 76 countries—we find empirical support for some of the factors that have been hypothesized in the literature, but not for others. Significant determinants of the pass-through coefficient include per capita incomes, bilateral distance, tariffs, country size, wages, long-term inflation, and long-term exchange rate variability. Some of these factors changed during the 1990s. Part (and only part) of the downward trend in pass-through to imported goods prices, and in turn to competitors’ prices and the CPI, can be explained by changes in the monetary environment—including a fall in long-term inflation. Real wages work to reduce pass-through to competitors’ prices and the CPI, confirming the hypothesized role of distribution and retail costs in pricing to market. Rising distribution costs, due perhaps to the Balassa-Samuelson-Baumol effect, could contribute to the decline in the pass-through coefficient in some developing countries.     

Rose effect and the euro: is the magic gone?

This paper presents an updated meta-analysis of the effect of currency unions on trade, focusing on the euro area. Using meta-regression methods such as the funnel asymmetry test, evidence for strong publication bias is found. The estimated underlying effect for currency unions other than the eurozone reaches more than 60%. However, according to the meta-regression analysis, the euro’s trade promoting effect corrected for publication bias is insignificant. The Rose effect literature shows signs of the economics research cycle: reported t-statistic is a quadratic concave function of the publication year. Explanatory meta-regression (robust fixed effects and random effects), that can explain about 70% of the heterogeneity in the literature, suggests that results published by some authors might consistently differ from the mainstream output and that study outcomes are systematically dependent on study design (usage of panel data, short- or long-run nature, number of countries in the data set).