The significance of trade unions in China*

Against the background of the rise (and fall) of Solidarity in Poland this article examines the nature of communist trade unions, focusing on their development in China and emphasising the need to use a different approach from that appropriate to capitalist societies.     

The political economy of monopoly and competition: A critique of monopoly and stagnation theory

This paper examines critically the Kaleckian theory of monopoly capitalism proposed by Cowling (1982). The supply side of the model is shown to be incapable of providing an aggregate degree of monopoly and the neglect of inter-sectoral competition is highlighted. On the demand side, there is little indication of the source of stagnationary tendencies; it is the emphasis on collusion over conflict which underpins stagnation. The model is characterised by its emphasis on distribution and exchange at the expense of production relations, and is an inadequate representation of ‘monopoly capitalism’.     

The term structure of the forward premium

Most studies of the efficiency of the foreign exchange market focus on a single maturity — usually a one month forward exchange rate. However, one observes that forward contracts of many maturities are simultaneously traded in the foreign exchange market. The hypothesis that the foreign exchange market uses all available information has implications for the joint behavior of forward exchange rates of various maturities. This paper proposes an equilibrium theory of the term structure of the forward premium. The model is tested using data on the German and Canadian exchange rates; the results indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada.     

Currency crises and contingent liabilities

A contingent liability is a future spending commitment that is realized with some probability. International organizations emphasize the dangers of contingent liabilities when providing advice. Why? One answer is obvious—if significant contingent liabilities are realized they commit governments to substantial fiscal costs. There is a further reason: by taking on a contingent liability the government can increase the probability of the underlying shock taking place. This paper describes how the issuance of government guarantees and the methods by which they are financed affect the probability of crises taking place. It also discusses the determinants of post-crisis inflation and depreciation.     

Efficient constitution formation and maintenance: The role of “exit”

A constitution will create mutual gains for all parties only if it is negotiated within an environment in which all parties possess viable exit options. The availability of exit options can substitute for a veil of uncertainty, which is difficult to operationalize in real-world settings. An efficient constitution also will be self-enforcing if it contains rules and principles geared to support political and market competition in the post-constitutional society. Again, the notion of exit is a useful way to characterize this condition for constitutional maintenance.     

Dollarization and currency exchange

We use a dual currency money search model to study dollarization. Agents hold portfolios consisting of two currencies, one of which is risky. We use numerical methods to solve for the steady-state distributions of currency portfolios, transaction patterns, and value functions. As risk increases, agents increasingly use the safe currency as a medium of exchange—dollarization occurs. Furthermore, the safe currency trades for multiple units of the risky currency. This type of currency exchange, and the corresponding nominal exchange rate, are often observed in black market or unofficial currency exchange markets in developing countries. Due to decentralized trading, a distribution of exchange rates arises, whose mean and variance change in predictable ways when currency risk increases.     

Another look at the forecast performance of ARFIMA models

This paper investigates the out-of-sample forecast performance of the autoregressive fractionally integrated moving average [ARFIMA (0,d,0)] specification, both when the underlying value of the fractional differencing parameter (d) is known a priori and when it is unknown. Forecast performance is measured relative to simple deterministic models and a random walk model, for forecast horizons up to 100 periods ahead. Overall, the linear models tend to outperform the ARFIMA specification for both the positive and negative values of d for the simulated series, and for positive d values from the real time-series data. The results of the study question the use of the ARFIMA specification as a forecast tool.     

Reform of Accounting Education in the Post-Enron Era: Moving Accounting 'Out of the Shadows'

This article reflects critically on the general state of university-based accounting education. It highlights the chiding of business school educators by the President of the U.S.A., George W. Bush, in his response to the collapse of Enron and subsequent corporate failures. It draws attention to Bush's plea for corporate accounting to be moved 'out of the shadows'.
An agenda of reform for accounting education is proposed, seeking a greater responsiveness by accounting educators to three broad matters: first, the political, rhetorical and ideological nature of accounting; second, the 'poverty of discourse' in accounting curricula; and third, the merits of a better understanding of accounting history. It is suggested that responsiveness to these matters be manifest in a stronger commitment to critique of accounting. This entails implementation of four curriculum themes commencing in the first class in accounting. The benefits of reading and reflecting upon the collected life's work of distinguished intellectual forbears of our discipline are canvassed. Wide-ranging general proposals for the reform of accounting education are advanced.     

The Owner–Manager Conflict in Insured Banks: Predetermined Salary versus Bonus Payments

This article examines the incentive of a bank's owners and manager to increase the level of assets risk if bank deposits are insured. The model consists of three players: a public insurer (e.g., the FDIC), the bank's owners, and its manager. Empirical evidence has shown that the management of risk (e.g., credit and interest rate risk) and a low level of audit and control can be instrumental in causing banks to fail or get into financial difficulties. In the model, the form of compensation to the manager plays a crucial role in determining the level of asset risk. The article shows under which conditions and form of compensation bank's owners and manager have an incentive to raise the risk level. The model is run first under the assumption that the information between the bank and the insurer is symmetrical, and then under the assumption that it is asymmetrical for two forms of pay: a predetermined salary; and bonus payments whose value is not known at the time the contract between the owners and the manager is signed. The article also examines whether there is a Pareto-optimal contract between the owners and the manager as regards the risk level, given the two forms of pay. This question is important because the absence of such a contract could indicate the existence of a source of instability in the banking system.     

Intergenerational and International Welfare Leakages of a Product Subsidy in a Small Open Economy

A dynamic overlapping-generations model of a small open economy with monopolistic competition in the goods market is constructed. Lump-sum tax-financed product subsidization boosts output and employment both in the impact period and in the new steady state. The real exchange rate depreciates in the long run but the impact effect is ambiguous. If the labour supply effect is weak and the economy is not very open, the exchange rate appreciates at impact. The policy has important intergenerational distribution effects. Old existing generations gain more than younger existing generations as well as future generations. The bond policy which neutralizes the intergenerational inequities allows the computation of an optimal product subsidy which depends positively on the extent of the domestic scale economies and negatively on the degree of openness of the economy.