Evaluating a Global Vector Autoregression for Forecasting

Global vector autoregressions (GVARs) have several attractive features: multiple potential channels for the international transmission of macroeconomic and financial shocks, a standardized economically appealing choice of variables for each country or region examined, systematic treatment of long-run properties through cointegration analysis, and flexible dynamic specification through vector error correction modeling. Pesaran et al. (2009) generate and evaluate forecasts from a paradigm GVAR with 26 countries, based on Dées, di Mauro et al. (2007). The current paper empirically assesses the GVAR in Dées, di Mauro et al. (2007) with impulse indicator saturation (IIS)??a new generic procedure for evaluating parameter constancy, which is a central element in model-based forecasting. The empirical results indicate substantial room for an improved, more robust specification of that GVAR. Some tests are suggestive of how to achieve such improvements.     

The power of asymmetric unit root tests under threshold and consistent-threshold estimation

The asymmetric unit root tests of Enders and Granger (Journal of Business and Economic Statistics, 16, 304–11, 1998) are examined using consistent threshold estimation and the original two-step procedure. In contrast to earlier studies, the ability of the tests to jointly reject the unit root and symmetry hypotheses is examined, thus permitting a fuller analysis of the tests' properties. Whilst the threshold autoregressive test is found to have little power in either its consistent or original forms, the consistent momentum-threshold autoregressive test is found to exhibit high power against a range of plausible alternatives when using newly derived critical values.     

Perpetual youth and endogenous labor supply: A problem and a possible solution

In the “perpetual youth” overlapping-generations model of Blanchard and Yaari, if leisure is a “normal” good then some agents will have negative labor supply. We suggest a solution to this problem by using a modified version of Greenwood, Hercowitz and Huffman’s utility function. The modification incorporates real money balances, so that the model may be used to analyze monetary as well as fiscal policy. In a Walrasian version of the economy, we show that increased government debt and increased government spending raise the interest rate and lower output, while an open-market operation to increase the money supply lowers the interest rate and raises output.     

The impact of more complex family structure upon marital earnings premiums

This article employs a unique data set from Trinidad and Tobago to examine the impact of their more complex family structures upon marital earnings premiums. While family structure includes the single married couple structure common in the US, families in Trinidad and Tobago often have more adults living in the household, multiple married couples living in the same family, and multigenerational families. Marital premiums for family members most likely to invest in labor market production are estimated to increase with more complex family structure. In contrast, estimated marital premiums for members most likely to invest in home production are decreased with more complex family structure. Results suggest that specialization within the larger family help explain the existence of marital premiums.     

Do Teachers Matter? Measuring the Variation in Teacher Effectiveness in England*

Using a unique primary dataset for the UK, we estimate the effect of individual teachers on student outcomes, and the variability in teacher quality. This links 7,305 pupils to the individual teachers who taught them, in each of their compulsory subjects in the high‐stakes exams at age 16. We use point‐in‐time fixed effects and prior attainment to control for pupil heterogeneity. We find considerable variability in teacher effectiveness, a little higher than the estimates found in the few US studies. We also corroborate recent findings that observed teachers’ characteristics explain very little of the differences in estimated teacher effectiveness.     

An Evaluation of the Value Relevance of Consolidated versus Unconsolidated Accounting Information: Evidence from Quoted Spanish Firms

In this paper we investigate the value-relevance of consolidated versus parent company accounting information. In particular we investigate the value relevance of the minority interest components of net total assets and earnings as currently reported and under the full entity approach to consolidated reporting. An Edwards-Bell-Ohlson valuation framework is used to generate results. By this means we cast light on the suitability of accounting regulation being developed based upon the entity or parent company theories of consolidation. We carry out the analysis in the Spanish context and the sample contains 474 observations of non-financial firms quoted in the Madrid Stock Exchange for the period 1991–97. The results from this analysis not only have domestic relevance but provide guidance of a more international nature relating to the impact of group definition, concepts of control and the most value relevant method of consolidated disclosure. The results show that, from a valuation perspective, consolidated information dominates non-consolidated, or parent company, information. However, neither the currently reported minority interest components of net total assets and earnings, nor their values under the full equity method of consolidation, are found to be value relevant. These results raise the question of whether group definitions based on the equity theory of consolidation are the most useful to investors.     

Diffusion of an Accounting Innovation: Fixed Asset Accounting in the NHS in Wales

As part of ‘New Public Management’ in the UK, changes have been made to the accounting regime. These changes typically involve the adoption of private sector accounting and budgeting approaches using accruals accounting. The process by which new ideas are spread is known as diffusion; this paper deals with the aspect of diffusion relating to the imposition of a new idea, accruals accounting, and how it is absorbed by the organisation, in this case the NHS in Wales. In particular, the paper questions whether the lack of secondary diffusion is limiting the influence of the new accounting approach. To analyse the level of diffusion we have focused on one aspect, namely, information on capital assets. The paper uses a mixture of qualitative and quantitative research methods including in-depth interviews with senior managers at two NHS Trusts and a questionnaire survey with responses from senior finance staff in all NHS Trusts in Wales. We conclude that the diffusion of accruals accounting for fixed assets has been restricted to the primary level at the top layer of management and has not penetrated below that level. There is evidence of continuing managerial indifference to the accruals accounting consequences of owning fixed assets.