Was It Real? The Exchange Rate-Interest Differential Relation over the Modern Floating-Rate Period

In this paper, we explore the relationship between real exchange rates and real interest rate differentials in the United States, Germany, Japan, and the United Kingdom. Contrary to theories based on the joint hypothesis that domestic prices are sticky and monetary disturbances are predominant, we find little evidence of a stable relationship between real interest rates and real exchange rates. We consider both in-sample and out-of-sample tests. One hypothesis that is consistent with our findings is that real disturbances (such as productivity shocks) may be a major source of exchange rate volatility.     

Detecting Earnings Management: A New Approach

This paper provides a new approach to test for accrual‐based earnings management. Our approach exploits the inherent property of accrual accounting that any accrual‐based earnings management in one period must reverse in another period. If the researcher has priors concerning the timing of the reversal, incorporating these priors can significantly improve the power and specification of tests for earnings management. Our results indicate that tests incorporating reversals increase test power by around 40% and provide a robust solution for mitigating model misspecification arising from correlated omitted variables.     

Can Interest‐Bearing Money Circulate? A Small‐Denomination Arkansan Experiment, 1861–63

Legal restrictions theory suggests that dominance of non-interest-bearing currency is possible only because legal impediments prevent financial institutions from offering interest-bearing alternatives. A viable interest-bearing medium must be issued in denominations low enough for day-to-day use, however, and without historical examples of small-denomination interest-bearing issues we cannot properly test whether interest-bearing currency will circulate as legal restrictions theory predicts. Civil War Arkansas offers a rare instance where large quantities of small-denomination interest-bearing money were actually issued, mostly below $5. The results of this Arkansan experiment show that small-denomination interest-bearing issues can indeed function as the primary medium of exchange.     

Collective Labour Supply: Heterogeneity and Non-Participation

We present identification and estimation results for the "collective" model of labour supply in which there are discrete choices, censoring of hours, and non-participation in employment. We derive the collective restrictions on labour supply functions and contrast them with restrictions implied by the usual "unitary" framework. Using the large changes in the wage structure between men and women in the U.K. over the last two decades, we estimate a collective labour supply model for married couples without children. The estimates of the sharing rule show that male wages and employment have a strong influence on bargaining power within couples.