The European initiative EUREKA

The European initiative for cooperation in research and development, known as EUREKA, began to take shape at the conference of 18 European countries and the EC Commission held in Hanover at the beginning of November 1985. Lutz G. Stavenhagen, Minister of State in the Foreign Office of the Federal Republic of Germany, and Otto Wolff von Amerongen, President of the German Industrial and Trade Association, discuss below the aims of the EUREKA programme and assess its chances of success.     

Aiding self‐employed car‐washers in the informal sector in Durban

In the past year, the South African Government has committed itself to ‘developing’ the informal sector as a strategy to ease the unemployment crisis and to aid the underemployed. In this paper, the author examines both the lives of self‐employed car‐washers and car‐washing as an activity within the informal sector. He argues that many ‘marginalised’ people who eke out a subsistence in the lower echelons of the informal sector in South Africa regard themselves as lumpenproletariat (or ‘wage‐labourers‐in‐waiting') and not dynamic entrepreneurs. These people expect the Government to intervene in the process of their transition to proletarianism. Further, activities such as car‐washing offer no prospects for self‐advancement.     

Effects of ethanol production from sugar‐cane with a free sugar market

A free market for sugar is simulated. Results indicate that area under sugar‐cane would decrease by 49 per cent and labour employment by 26 per cent relative to the actual situation. Sugar‐cane would only be produced in areas with a comparative advantage. No sugar would be exported. Ethanol production from sugar‐cane would only occur with government price supports which would lead to an increase in the price of edible sugar. Development costs per additional worker employed of a one billion litre ethanol industry would amount to about R35 300 compared with over one million rand for a new petroleum from coal plant (Sasol).     

Changing interest rate responses to money announcements: 1977–1983

This paper investigates when and how the response of interest rates to money announcements changed in recent years. The response of both short and long rates rises in October 1979, but drops during 1981. During mid-1982, the response of long rates raises again, but without a change in the response of short rates. Despite a number of ex post explanations for these shifts, none of the major hypotheses of why interest rates respond to money announcements provides a complete ex ante explanation of these response shifts.     

Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects

This paper provides empirical support for the notion that Autoregressive Conditional Heteroskedasticity (ARCH) in daily stock return data reflects time dependence in the process generating information flow to the market. Daily trading volume, used as a proxy for information arrival time, is shown to have significant explanatory power regarding the variance of daily returns, which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns. Furthermore, ARCH effects tend to disappear when volume is included in the variance equation.     

Austrian Business Cycle Theory, Keynes’s General Theory, Soaring Wheat Prices, and Subprime Mortgage Write-Downs

Keynes’s presentation of own rates of interest on wheat and housing is set within Austrian business cycle theory, to show that soaring wheat prices and subprime mortgage writedowns are expected, when a monetary authority holds interest rates too low for too long. From that basis, further interest rate cuts are an unlikely remedy for a recession whose roots lie in a proliferation of credit.