Stylised facts and other empirical evidence on firm dynamics,business cycle and growth

In this paper, we bring together, in a systematised fashion, the scattered empirical evidence relating firm dynamics with both short-run and long-run macroeconomic dynamics. There are numerous studies that focus on firm-level data while controlling for macroeconomic conditions. From these studies a fairly robust set of empirical regularities pertaining to entry, exit, growth and the size distribution of firms has emerged. However, the literature that focuses explicitly on the interplay between firm dynamics and the business cycle is roughly confined to the US experience and to the cyclical properties of firm entry and exit, while the studies about the relationship between firm dynamics and economic growth are limited and unsystematic. We also give a brief account of the most recent theoretical literature on firm dynamics and macroeconomic dynamics, and try to relate it to the empirical findings.     

Beyond the Toledo agreement: the intergenerational impact of the Spanish Pension Reform

The paper examines the intergenerational impact of the Spanish public pension system after the 1997 Pension Reform Act. Within a Generational Accounting framework, we find that the new legal setting could leave future generations with liabilities as high as 176% of 1996 GDP. Hence, we analyse the impact of alternative reforms. Holding the pay-as-you-go setting, a further improvement to tax-benefit linkage in line with the Toledo Agreement proposals is shown to yield an intergenerationally more balanced outcome, than an increase in the retirement age or an expansion of public subsidies financed through indirect taxes. Finally, a move toward a partially funded pension system which restores the intergenerational balance is simulated.     

The Effect of EMU on Tourism*

This paper estimates the effect of the euro on intra‐EMU tourist flows by using a panel dataset of 20 OECD countries over the period 1995–2002. The results reveal that the euro has increased tourism, with an effect of around 6.5%. This is a noticeable impact given the early stage of the EMU analyzed. The robustness checks show that the evidence of a positive impact is quite widespread across EMU destination countries.     

Mozambique Metical Exchange Rate Dynamics: Evidence of Fractional Co‐Integration in the USA and South African Rates

This paper studies the exchange rate dynamics of the Mozambique metical with respect to the US dollar and the South African rand. However, instead of using standard I(0)/I(1) techniques, we use long memory and fractionally integrated and co‐integrated models. Our results indicate that the two exchange rates are highly persistent, with orders of integration equal to or above 1. They also seem to be co‐integrated, with an order of integration close to albeit above 0 but with an AR coefficient very close to 1. Thus, although the two series seem to be fractionally co‐integrated, shocks in the long‐run relationship between the two variables are persistent and take a long time to disappear.     

Auditors' Fee Premiums and Low‐Quality Internal Controls*

We examine the relation between low‐quality internal controls and audit fee premiums. Using a novel data set of audit hours and audit fees we find, consistent with the audit risk model, that auditors increase their effort (hours) owing to low internal control quality. We find that auditors also charge a significant fee premium to clients with internal control weaknesses. This premium is observed for severe internal control weaknesses and companies with low‐quality alternative governance mechanisms. The results are robust to multiple methods to address endogeneity, including company fixed effects, difference‐in‐differences design, and a propensity score‐matched sample. Taken as a whole, low internal control quality leads to fee premiums, which are a deadweight loss to client companies.