Wage Effects of Drinking in Australia

This article analyses the wage effects of drinking using the Australian Twin Registry data. A multinomial logit framework is employed to explain the allocation of workers across various drinking states, and to correct for selection bias in the wage equations. It is found that there is a significant positive wage premium for moderate drinking. A favourable family background (during childhood) is positively related to the measure of moderate drinking. Greater genetic endowments are also associated with moderate drinking.     

What Caused the Korean Currency Crisis in 1997?*: Weak Fundamentals or Self‐fulfilling Expectations*

The present paper investigates which factor is primarily responsible for the sharp depreciation of the Korean won against the US dollar in 1997, using a bivariate vector autoregressive model of real and nominal exchange rates. In the present study, we directly identify the relative importance of fundamental and non‐fundamental factors from the raw data series on exchange rates. This approach is different from most previous studies on the Korean currency crisis, which use proxy variables to represent the two factors. The empirical results show that the collapse of the Korean currency in 1997 appears to be mostly a result of the weakened macroeconomic fundamentals of the economy with, to a limited extent, some non‐fundamental factors.     

MEAN AND VOLATILITY SPILLOVERS ACROSS MAJOR NATIONAL STOCK MARKETS: FURTHER EMPIRICAL EVIDENCE

This paper provides additional insight into the nature and degree of interdependence of stock markets of the United States, Japan, the United Kingdom, Canada, and Germany, and it reports the extent to which volatility in these markets influences expected returns. The analysis uses the multivariate GARCH-M model. Although they are considered weak, statistically significant mean spillovers radiate from stock markets of the U.S. to the U.K., Canada, and Germany, and then from the stock markets of Japan to Germany. No relation is found between conditional market volatility and expected returns. Strong time-varying conditional volatility exists in the return series of all markets. The own-volatility spillovers in the U.K. and Canadian markets are insignificant, supporting the view that conditional volatility of returns in these markets is “imported” from abroad, specifically from the U.S. Significant volatility spillovers radiate from the U.S. stock market to all four stock markets, from the U.K. stock market to the Canadian stock market, and from the German stock market to the Japanese stock market. The results are robust and no changes occur in the correlation structure of returns over time.     

A Keynesian general equilibrium model with competitive firms and rational expectations

A Keynesian general equilibrium model is developed from neoclassical principles. The model is based on competitive firm behavior, and optimizing agents that form expectations rationally. Firms determine their product price to maximize expected profits. Non-neutrality results follow from micro foundations that view firms as committing to a price and output level before actual demand is observed. It follows that optimal output levels are in part determined by demand conditions. In the general equilibrium framework, increases in government spending lead to welfare-improving increases in aggregate output.I thank Tom Cosimano, Strat Douglas, Douglas Gale, Norm Miller, Nick Rowe, Geoffrey Woglom, and two anonymous referees for valuable comments. The responsibility for potential errors remains entirely my own.     

Competitive Advantages, Two-Way Foreign Investment, and Capital Accumulation in Korea

This paper provides a simple theoretical framework and an empirical analysis of the relationship among competitive advantages, inward and outward DFI, and domestic capital accumulation, applied to the case of Korea. Outward DFI in Korea is found to originate largely from those sectors in which Korea has proven its competitive advantages in world markets. Inward DFI flows have contributed to enhancing competitive advantages of Korean manufacturing in certain sectors, although it does not seem to lead to a more rapid domestic capital accumulation of the receiving sector, which is largely determined by the profit rates of the various sectors.     

Information Provided by Accrual and Cash-Flow Measures of Operating Activities

This article examines accrual and cash-flow measures useful for observing companies' financing, investing and operating activities. It addresses the information provided jointly by income and operating cash flow, and reveals that information provided by these accounting measures is dependent on their relative magnitudes. A consistent pattern of income in excess of operating cash flow, with both measures appropriately adjusted and scaled, indicates superior company growth. Income and cash-flow patterns are associated significantly with various company financing, investing and operating attributes. Empirical tests confirm that both income and operating cash flow are important for observing company performance and prospects when considered jointly and when interpreted with respect to accounting measurement theory. At least for many companies, the results do not support the conventional wisdoms that accounting measures of income and operating cash flow converge over long periods of time and that earnings provide a reliable basis for cash-flow prediction.