Development and the mystification of ‘cultural factors’: One destiny: Our common future in Africa,by A S van Niekerk

In One destiny: Our common future in Africa the author relates, in popular fashion, a series of incidents which convinced him that the basic difference between black and white in South Africa is cultural deep‐seated and the cause of underdevelopment and conflict He develops a circular argument in which world‐view is taken as the root of perceptions, values and activities. The effects of experience and economic and political factors are given secondary importance. This argument cannot accommodate social change and differentiation, and the author tends to concentrate on perceptions and events which he finds morally unacceptable. He gives an unbalanced assessment and an ethnocentric interpretation of African life. Possible reasons for this type of argument are explored and an alternative which takes its departure from the interaction between experience and perception is offered     

Some Evidence on the Relevance of Bank Behaviour for the Lending Channel in The Netherlands

This paper studies the behaviour of Dutch banks. We test the adjustment of banks' balance sheets in times of monetary policy changes during the period 1957–1991. As a reaction to a policy change, banks basically have two alternatives to adjust their net money creation: (1) sell securities in public capital markets, and/or issue long-term liabilities, and (2) change domestic loan supply. If banks opt for the latter a lending channel may be relevant, even in a small open economy with a fixed exchange rate and a high degree of international capital mobility. We test for the effectiveness of both indirect and direct instruments of monetary policy. It turns out that in case of changes in the official interest rate, the volume of bank loans is not affected and that banks display a kind of buffer-stock behaviour by diminishing their publicly traded assets. In situations with quantity restrictions on the growth of net money creation, however, the volume of loans is affected significantly when the quantity restriction is withdrawn thereby fulfilling a necessary condition for the bank lending channel to be effective.     

Nowcasting South African gross domestic product using a suite of statistical models

Given lags in the release of data, a central bank must ‘nowcast’ current gross domestic product (GDP) using available quarterly or higher frequency data to understand the current state of economic activity. This paper uses various statistical modelling techniques to draw on a large number of series to nowcast South African GDP. We also show that GDP volatility has increased markedly over the last 5 years, making GDP forecasting more difficult. We show that all the models developed, as well as the Reserve Bank's official forecasts, have tended to overestimate GDP growth over this period. However, several of the statistical nowcasting models we present in this paper provide competitive nowcasts relative to the official Reserve Bank and market analysts' nowcasts.     

Risk Sharing in a World with Processing Costs: Trading versus Banking

We analyze the bank versus exchange problem in a Diamond Dybvig (1983) economy with exogenous transaction processing costs. We find that processing costs in the market enables the bank to overcome the side trade threat ( Jacklin (1987) ) and offer some desirable liquidity insurance. Moreover, in the bank equilibrium processing costs are proportional to consumption, while in the market economy early and late consumers incur equal costs. These two effects explain that for a given level of aggregate processing costs, the bank economy is superior. On the other hand, the number of transactions in the bank economy is larger. It is for this reason that if processing costs are proportional to transaction value, and independent of the mechanism used, the exchange economy is superior.     

The European economy in an expanding world

Summary Postwar economic development in Europe can be subdivided in two periods. In the first subperiod 1950–1973 growth is determined by catching up vis-d-vis the US. The second subperiod 1973–1993 is characterised by a reorientation with respect to the international division of labour. This sets the stage for future developments, which are presented in the form of three different scenarios. In the European Decline scenario Europe cannot match developments in the US and Japan. As appears from a scenario called Fortress Europe import protection provides no sensible solution. To compete on a world scale Europe needs more technological dynamics as sketched in the European Recovery scenario. Calculations of future paths are based on the WorldScan model of the Central Planning Bureau.Theo van de Klundert is Professor of Economics at Tilburg University. Ben Geurts and Hans Timmer are staff members of the Central Planning Bureau, The Hague. We are indebted to Martin Fase and Simon Kuipers for useful comments on an earlier version of the paper.     

BUDGETARY POLICIES, FOREIGN INDEBTEDNESS, THE STOCK MARKET, AND ECONOMIC GROWTH

This paper analyses a small open economy with overlapping generations,endogenous growth, and a risk premium on foreign debt. A balanced-budgetincrease in public consumption or a rise in government debtraises the ratio of foreign debt to domestic income and theinterest rate, but depresses economic growth. Supply-side policiesaimed at internalising production externalities boost foreignindebtedness, the interest rate, and economic growth. A higherglobal interest rate leads, if initial foreign indebtednessis not too large, to a lower foreign debt and, if a countryis dragged down by large levels of foreign debt, lower economicgrowth.     

Brain Drain: A Management or a Property Problem?

Abstract . Brain drain occurs when skilled individuals leave their native countries. It is often argued that this phenomenon has strong negative effects on the countries of origin, preventing them from capitalizing on their investment in human capital formation and thus realizing a higher growth. This analysis shows that the negative consequences of brain drain have been overemphasized, mainly because of the confusion between capital and technology. It demonstrates that investments in human capital are possible and profitable in a free market. State intervention in education is responsible for the systematic misallocation of human capital in general, and for brain drain in particular.     

Identifying Decision Useful Information with the Matrix Format Income Statement

We conduct an experiment to investigate the potential benefits of an alternative format for the income statement, the matrix format, initially developed by the International Accounting Standards Board (IASB) and UK Accounting Standards Board in their joint project on performance reporting. Sophisticated financial statement users (financial analysts and professional accountants) and less sophisticated financial statement users (MBA students) were asked to extract information from a set of financial statements that included an income statement either in the IAS 1 format or in the matrix format. We find that the matrix format improves the accuracy with which users extract financial information. This result is driven by greater accuracy, for all user groups, on “below‐the‐line” items. Furthermore, despite lack of familiarity with the matrix format, its use did not appear to affect the time taken, the ease of extracting financial information, or users' task completion confidence; further experience with the matrix format could lead to benefits along these lines as well. Our findings may assist the FASB and IASB in their joint project on financial statement presentation.     

Gibbsian and non-Gibbsian states at Eurandom

We review some of the work on non-Gibbsian states of the last 10 years, emphasizing the developments in which Eurandom played a role.     

ENTRY AND EXIT, CYCLES, AND PRODUCTIVITY GROWTH

This paper examines the impact of cycles on long-term growthin the presence of entry and exit of firms It is argued thatwhereas mild fluctuations may be beneficial for growth, moresevere fluctuations will be detrimental for growth The essentialpoint is whether recessions go beyond the point that triggers(large-scale) exit of firms Mild fluctuations may have a positiveeffect through the intertemporal substitution between productionand productivity improving activities Severe fluctuations, however,which lead to exit of firms, cause losses of knowledge and skillsduring recessions, and are therefore bad for long-term growth