Inflation and monetary regimes

Correlations of inflation with the growth rate of money increase when data are averaged over longer time periods. Correlations of inflation with the growth of money also are higher when high inflation as well as low-inflation countries are included in the analysis. We show that serial correlation in the underlying inflation rate ties these two observations together and explains them. We present evidence that averaging increases the correlation of inflation and money growth in more when the underlying inflation rate has higher serial correlation.     

Competitive viability in banking : Scale, scope, and product mix economies

Conventional scale and scope economies are inadequate to determine the competitive viability of banks that vary in scale and product mix simultaneously. This paper develops two new and more general measures of multi-product economies. Slight diseconomies of scale and product mix are found for banks, usually on the order of 1 to 3 percent, which may be due to demand-side influences. These are robust to differing cost and output specifications, organizational levels, and competitive environments. These results differ from other banking studies that found scope economies, a conflict that may be due to methodological difficulties.     

The impact of free and exaggerated prices on perceived quality of services

Previous research in the price-quality area has largely limited its focus to the normal price range and has concentrated on physical goods almost entirely. This study examines the effect of offering a service for free and at an exaggerated price on the perception of its quality. Consistent with the theory developed in this paper, the experimental results suggest that when the tested services are offered for free and for exaggerated prices, they are perceived as lower in quality than when they are offered in a normal price range.     

Virtue as a Benchmark for Spirituality in Business

Business people often consider spirituality a means of increasing integrity, motivation and job satisfaction. Yet certain spiritualities are superficial and unstable. Religion gives depth and duration to a spirituality, but may also sew divisiveness. A spirituality's ability to develop good moral habits provides a positive test of the "appropriateness" of that spirituality for business. Many successful business executives demonstrate a spirituality that does develop good moral habits.     

Recent Developments in the Theory of the Firm

Abstract
This article reviews recent literature on the theory of the firm. The issues addressed include the role and determinants of the size of firms, the financial structure and organisation of labour in firms, and the policy implications of this research .     

Optimal new-product pricing in regulated industries

Intertemporal pricing issues faced by regulated monopolists in market settings characterized by high rates of innovation have received little attention in the regulatory economics literature. Most analyses of regulatory pricing have focused on monopolies characterized by a stable multiple-good product set. In a regulated industry characterized by technological change in the form of new products and services (such as telecommunications), optimal pricing decisions may also reflect intertemporal market and production factors. In this paper, two such intertemporal factors are modeled: learning curve effects on the firm's cost function, and customer demonstration effects on the demand side of the market. Inclusion of these factors leads to an intertemporal pricing rule that may conflict with the standard regulatory practice whereby each product or service must recoup its own resource costs period by period. Our results suggest that this regulatory practice can result in efficiency losses, since it results in a rate of technological diffusion that is too low.     

The welfare effects of import “subquotas” on heterogeneous product categories

In spite of its importance to policy makers, surprisingly little attention has been paid to the welfare effects of one aspect of trade policy-how to implement an import quota that applies to a heterogeneous product category. The government can impose a simple quota that applies indiscriminately to all goods within the product category or it can divide the quota among them with subquotas. In this paper, we analyze the welfare effects of subquotas. Under certain simplifying assumptions we find that a system of subquotas nearly always exists that provides greater welfare than a simple quota for a large country that retains quota rights or for a large or small country that gives quota rights away to foreigners. However, subquotas cannot increase the welfare of a small country that retains quota rights. The difference lies in the effect of imports on the home country's terms of trade.The views expressed in this paper are those of the authors and do not necessarily reflect the opinion of the US International Trade Commission. The authors are grateful for helpful comments on an earlier draft by anonymous referees.     

The Effect of Joint Auditor Pair Composition on Audit Quality: Evidence from Impairment Tests

Using a sample of firms from France, where the law requires the use of two auditors, we study the effect of auditor pair composition on audit quality by examining a specific account, goodwill impairment. We document that firms audited by a Big 4–non‐Big 4 auditor pair (BS) are more likely to book an impairment and book a larger impairment than firms audited by a Big 4–Big 4 auditor pair (BB) when low‐performance indicators suggest a greater likelihood of impairment. Moreover, firms audited by a BB pair reduce impairment disclosures when they book impairments, while firms audited by a BS pair do not, suggesting lower transparency for firms audited by a BB pair. Our results inform investors and firms in mandatory joint audit regimes, as well as regulators who are considering requiring joint audits.