An Examination of Substitution among Monitoring Devices: The Case of Internal and External Audit Expenditures

Much of the agency literature assumes that various monitoring devices are partial substitutes in reducing total agency costs. In particular, internal and external auditing often are characterized as monitoring devices that should be partial substitutes. We argue that reliable evidence of this relation is lacking because prior studies using cross-sectional archival data have not carefully considered the implications of microeconomic theory of substitution for the models estimated. Our analysis leads to a reexamination of the relation using time-series data. We find no evidence that systematic substitution of internal for external auditing (or vice versa) occurred during the period 1989–1993. Further analysis indicates that the relative prices of internal and external auditing inputs did not change during the period. Therefore a necessary condition for substitution to occur did not exist. Although we do not detect substitution with our sample, the analysis and methodology we develop contribute to the literature by enhancing researchers understanding of substitution among monitoring methods.     

Risks,Resilience, and Reforms: Indonesia’s Financial System in 2019

Indonesia has managed the complex challenges of the global economy well. The country's capital outflows were smaller in 2018 than during the Taper Tantrum in 2013; the rupiah had regained most of its lost ground by January 2019; the Indonesian stock market has outperformed its peers; growth is forecast to remain stable; inflation is low; unemployment remains below its five-year average; consumer and business confidence are robust; and the government budget has improved through a smaller deficit and cheaper borrowing costs. But significant risks remain. This paper assesses these risks and evaluates the adequacy of Indonesia's crisis management framework. It finds that the framework has serious deficiencies that could see liquidity challenges become systemic solvency crises. The framework effectively removes Bank Indonesia as the lender of last resort, risks politicising the process of crisis response, and could mean slower, less effective responses to crises. This paper explores how the framework could be improved and what reforms could be undertaken to deepen Indonesia's financial system, strengthen financial resilience, and boost the long-term growth outlook.     

Nectar for the taking: the popularization of scientific bee culture in England, 1609-1809

This essay expands and refines academic knowledge of English beekeeping during the seventeenth and eighteenth centuries. Scientific beekeeping focused on improvement, which, in turn, depended on the dissemination of ideas and practices. This analysis, therefore, encompasses the mentalities and tactics of popularizers. The article also identifies two neglected concepts in the popularization campaign. First, popularizers saw scientific beekeeping as a way to end the tradition of killing the bees in order to safely harvest. Second, they sought to promote a rural industry for the economic welfare of the nation. The case study of Exeter's Western Apiarian Society reveals precisely how popularization functioned in reality. The result is a more thorough history of scientific beekeeping and how the rhetoric of improvement related to the culture of practice.     

Farmer responses to changing risk aversion,enterprise variability and resource endowments

The focus of this article is on assessing how risk aversion, enterprise variability and resource endowments affect farm land‐use decisions and economic returns. A theoretical model of a two‐enterprise, two‐constraint farm is developed, and then, an empirical illustration for an Australian farm is provided. The methodology used builds on previous expected mean‐variance (EV) models by incorporating land and budget constraints. The Kuhn–Tucker conditions of the EV model are examined to highlight that changes in resource endowments have larger effects on economic returns, than do changes in risk aversion or enterprise gross margin variability. It was also found that combinations of enterprise mixes that do not use all available resources can produce higher economic returns, relative to some enterprise mixes that use all available resources.     

A Subcultural Analysis of the Brazilian Knowledge Industry: When Nation,Industry, and Organizational Cultures Collide

ABSTRACT

This exploratory research seeks to better understand the relationship between national and industry culture, concentrating particularly on the case of the Brazilian knowledge industry. Perceptions of real and ideal corporate values were obtained from 98 professional and managerial staff from Brazil and 40 from the United States. The results were also compared to those of a multi-industry Brazilian sample reported in Nelson and Gopalan (2003 Nelson , R. E. , and Gopalan , S. ( 2003 ). “Do Organizational Cultures Replicate National Cultures?” Organization Studies , Vol. 4 , pp. 115 – 152 . [Google Scholar]). The Brazilian knowledge industry respondents' view of their organizational culture was much more favorable than the US knowledge industry respondents' perceptions. The Brazilian knowledge industry sample also contained unique subcultures that varied by employment regime and favorably reflected on the industry's ability to adapt to modern trends. This configuration of results does not clearly favor any of the major theories of organizational culture but suggests a complex pattern of interaction between country, industry, industry position, and employment regime. The results do, however, suggest that interaction effects of country by industry may be much stronger than the main effects of either industry or nation.     

A model of liability dollarization and myopic governments

Abstract

Liability dollarization of the domestic banking system represents a source of vulnerability for emerging market countries. The root cause is a lack of faith in the domestic currency, which ultimately stems from the belief that the government will not follow policies that promote long-run currency stability. This paper presents a model in which government myopia determines the unofficial dollarization of bank credit. Specifically, myopic politicians will choose low interest rates to expand short-run output in order to get re-elected, but this choice has the long-run consequence of increasing dollar lending. Increased liability dollarization is shown to force the hand of future decision-makers into choosing fixed exchange rates because of the fear that large depreciations will destroy balance sheets. The results imply that institutional reforms are necessary to reverse liability dollarization.     

Institutional Adjustment,Instrumental Efficiency,and Reasonable Value

Abstract:

In this paper, we apply Celso Furtado’s vision of the process of economic development to the United States’ economy. Furtado was a creator of Latin American structuralism and continues to be one of the region’s most influential economists. Yet, he is little known in the English literature. As we argue, there are few academics who offer a theoretical framework capable of robustly evaluating the current trajectory of U.S. economic development with the depth of Furtado. Through his analytical lens, and with some help from John Maynard Keynes, we examine the present reality, as well as the more remote economic history of the US. We argue that, seen through Furtado’s lens, the US can now be accurately described as an under-developing economy.