Habits And Durability In Consumption And The Effects Of Exchange Rate Policies

The effects of exchange rate policies are worked out in a model in which consumption goods are durable, and money enters the utility function. The interaction of habits and durability results in a non-monotonic adjustment of consumption expenditures, and the current account. As money does not exhibit durability, its dynamics are montonic, and determined mainly by habits effects. Hence, an increase in the rate of depreciation of the domestic currency will very likely lead to a nomonotonic adjustment of consumption and the current account, while the adjustment of real money holdings will be monotonic [F31, F32, F41]     

Entrepreneurial Selection,Financial Markets,and Patterns of International Trade

This paper introduces entrepreneurial selection and imperfect financial markets to the 2x2x2 model of international trade. Entrepreneurs are heterogeneous in ability and borrow from banks who do not observe their ability. The pattern of international trade depends on (1) factor abundance, (2) endogenously determined productivity, and (3) endogenously determined financial market imperfections. We show that entrepreneurial selection results in a diminished Rybczynski effect and financial market imperfections further reduce the effect; hence differences in capital abundance imply a smaller trade volume than predicted by the Heckscher-Ohlin theorem. The results help to resolve a conflict between the Heckscher-Ohlin model and data. [F11]     

Distorted competition: Below-cost legislation, ‘marges arrière’ and prices in French retailing

Abstract

The aim of this article is to demonstrate that the French Galland Act, outlawing below-cost resale via new and more severe invoicing regulation, has reduced the intensity of price competition among retailers in relation to branded goods. Moreover, the reduced intensity of price competition in the retail industry has encouraged a lessening of competition among the manufacturers of major industrial brands. Together, these two effects have sown the seeds of a sustained increase in the price of major brands, accentuating retail competition based more on differentiation than on price. These sustained policies have favoured the development of retailer brands and of hard discount stores and finally encouraged new types of reactions from major retailers and leading manufacturers, such as new types of promotions circumventing the Galland Act and a more intense lobbying activity in order to reform it.     

Using an historical account book as a teaching tool

Historical account books from the 18th and 19th centuries are valuable historical documents reflecting the activities of individuals many years ago and shedding light on the way they lived. Such books can be used to teach accounting. From our experience, these books serve to motivate students to learn about the basic aspects of the accounting process. Students are curious about how a book of this nature was prepared, what specific purposes it served, and how it is similar to and different from modern account books. Using these books can also foster interdisciplinary instruction, i.e. accounting and history. Both subject areas relate to an account book. Attempting to explain and understand transactions requires some knowledge of the history of the period in which the book was prepared. In this study, specifics are given on the instructional approach we recommend. While a book of this kind can be used in different ways and degrees in a variety of accounting courses including introductory financial, intermediate, and advanced at the undergraduate and graduate levels, we focus in this case study on its use in introductory financial accounting.     

The Effect of Investor Status on Investors' Susceptibility to Earnings Fixation

This study investigates whether an individual's status as a current or a prospective investor affects the investor's susceptibility to earnings fixation and proposes a mechanism to reduce earnings fixation. Our experimental results suggest that current investors are more susceptible to earnings fixation than prospective investors, and that current investors can reduce earnings fixation by explicitly forecasting future earnings as part of their evaluation process. We provide theory‐consistent evidence that current investors' prevention focus makes them elevate the importance of summary earnings in their evaluation of a company. However, after forecasting future earnings, current investors view summary earnings as only one of several similarly important evaluation inputs rather than as one substantially more important input (relative to its components). Our study contributes to research on earnings fixation and investor status. We also contribute to practice by documenting the moderating effect of investor status on earnings fixation and by identifying a simple mechanism that current investors can use to reduce their susceptibility to earnings fixation.