Velocity Effects of Increased Variability in Monetary Growth in Egypt: A Test of Friedman's Velocity Hypothesis

Abstract: This paper tests Friedman's hypothesis that increased variability in the growth of money supply causes velocity to decline, using Egyptian data from the period 1960–99. The monetary aggregates M1 and M2 are decomposed into anticipated and unanticipated components and the variability of money growth is computed as the standard deviation of five years of monetary growth rates. Cointegration tests show that there is a statistically significant long‐run relationship between the variability in money growth and velocity, for both M1 and M2. However, while increased variability in the growth of M2 is found to be associated with lower velocity — supporting Friedman's velocity hypothesis — increased variability in the growth of M1 seems to have no influence on velocity, possibly because the definition of M1 has changed over time. The findings also suggest that anticipated movements in M2 volatility are not neutral, in the sense that they do affect velocity. An important implication is that the scope for discretionary monetary policy in Egypt is somewhat circumscribed in the short run. However, if the Central Bank of Egypt were to make its decisions more transparent and pre‐announce its policies, then velocity would be more predictable and monetary policy more potent.     

Technical Change, Growth and Trade: New Departures in Institutional Economics

This article analyses the main theoretical and policy issues emerging from the literature on the evolutionary-institutional economics of technical change, the four distinguishing characteristics of which are that technology is often proprietary in nature; only a part of knowledge is codifiable in handbooks, blueprints, patents, and so on; there are fundamental variations in the above two points across different technological fields; and the evolution of knowledge is highly path-dependent.     

Casino Revenues and Retail Property Values: The Detroit Case

We analyze the effects of commercial casinos on retail property values in the Detroit urban area. Accounting for property characteristics and proximity to the casinos, casinos are found to have a significantly positive influence on retail property values. The effect is stronger within a 5-mile radius of the casinos, suggesting that casinos have a complementary, rather than substitution, effect on other businesses. This provides some of the first micro-level empirical evidence to support the “drawing power” of casinos and the impact of consumer spending on surrounding businesses. The model developed and tested in this study can be applied to other casino jurisdictions to gain further evidence on the impact of commercial casinos.     

Two state capital accumulation with heterogenous products: Disruptive vs. non-disruptive goods

The paper considers the problem of a firm that, while producing a standard product, has the option to introduce an innovative product. The innovative product competes with the standard product and will therefore reduce revenues of the standard product. A distinction is made between innovative products that do or do not become even more relatively appealing as their market share grows (e.g., because of network externalities). It is shown that in the former case, which we call a “disruptive” good, history dependent long run equilibria can occur, which are in line with recent real life economic examples.     

The influence of the financial press on stockholder wealth: the case of corporate governance

This study examines the impact that the publication of ratings of boards of directors by the business press has on stockholder wealth. We report findings from an event study of price reactions to the publication of Business Week's 1996 and 1997 ratings of boards of directors of U.S. corporations. As hypothesized, favorable ratings resulted in significant positive abnormal returns after controlling for market effects and confounding events, with only novel information explaining statistical variance. Contrary to expectations, unfavorable ratings also resulted in positive abnormal returns. Copyright © 2005 John Wiley & Sons, Ltd.     

Balance of Payments Constrained Growth and Developing Countries: An examination of Thirlwall's hypothesis

Thirlwall's hypothesis of balance of payments constrained growth has been widely tested for developed countries, but much less for developing countries. Further, previous tests have used dated estimates derived using non-robust econometric techniques. After discussing the conditions under which Thirlwall's hypothesis would be valid and the econometric issues involved, this study reports error correction estimates of import and export demand functions for a large sample of developing countries. Deriving the long run income elasticities of demand from these functions, the study reports tests for different specifications of Thirlwall's hypothesis on this sample and finds some support for it.     

The Price is Right? Pay Settlements and Nominal Wage Rigidity in Britain

We examine representative, group‐level wage settlement data to augment the debate on nominal pay rigidity in Britain. We investigate the characteristics of groups that settle at zero and the role of within‐firm and external influences. Nominal settlement cuts are rare. Zero nominal wage settlements are more common, but still relatively unusual, highest during (low‐inflation) recessionary periods. Small groups, above all firms under duress, appear most likely to settle at zero. Once a group settles at zero it is unlikely to do so again in the short run.     

Equilibrium dumping with endogenous anti-dumping penalties

The author develops a quantity setting model of firm behavior that captures the twofold effects of a dumping margin between market periods. The dumping margin determines the probability of getting charged with dumping and the size of the fine imposed, if caught. Both the probability of being charged with dumping and the size of the fine associated with dumping are endogenized. Profits are inter-temporally linked. The solution concept is the pure strategy Markov Perfect Equilibrium. The results are appealing: a margin of dumping that recurs is relatively easy to find under uncertain enforcement. The author finds reason to believe that the current anti-dumping legal structure is not likely to cause either an end to dumping or price equalization.The author thanks Marie Thursby, Jim Moore, Dan Kovenock, and Yukiko Hirao for their work. Appreciation also goes to Jon Haveman for helpful suggestions and Usha Nair for noisy discussions. Any errors found in this paper are the responsibility of the author.     

The Effect of Social Capital on Fertiliser Adoption: Evidence from Rural Tanzania

Do the characteristics of local social structures affect fertiliseradoption among rural households? This paper extends the modelof technology adoption of Feder and Slade (1984) to incorporatesocial capital, and then tests the model with household datafrom two agro-ecological zones in rural Tanzania. Probit estimatesof the model show that the probability of adoption of improvedfertiliser in 1994–5 in the Central Plateau region isincreasing in land under cultivation, cumulative adoption patterns,ethnically based social affiliations, the adoption of improvedseeds, the availability of credit and extension services andthe average years of residence in the village. In the Plainsregion, this probability is increasing in land under cultivation,ethnically based social affiliations and consultative norms.Overall, these results, which are robust after testing for thelikely reverse causality of land under cultivation, supportthe finding that ethnically based and participatory social affiliationsact as forms of social capital in the adoption decision.     

Organisational change, outsourcing and the impact on management accounting

New empirical evidence is presented on organisational change, outsourcing and the impact on management accounting in three types of organisations: private sector companies, the National Health Service and Local Authorities. Spearman rank correlations are used to examine three propositions: that (i) change in organisational form exists and may be related to an increased use of outsourcing or subcontracting; (ii) outsourcing is expected to improve organisational flexibility and/or the service of an activity, to lead to cost savings, or to allow the organisation to focus more clearly on its core business; and (iii) outsourcing promotes change in management accounting. Statistical support is found for each of our three propositions. This is further supported by reference to three illustrative case studies. Overall, we conclude that organisational change, as effected by the use of outsourcing, is related to specific changes in the organisations' management accounting systems.