Diminished Returns? Growth and Investment in East Asia

This paper investigates the investment-led growth hypothesis for the newly industrialized economies of East Asia. Using numerical simulations and a neoclassical model, it is shown that the revolution in investment rates only explains about 30 per cent of the growth of GDP per worker. In contrast, productivity growth and improvements in labour quality, explain around half the growth of GDP per -worker. This reflects the effects of productivity growth on capital accumulation. Contrary to recent growth-accounting studies, the results suggest that understanding the sources of productivity growth in East Asia will provide the most useful lessons for other developing economies.     

Australian Proprietary Companies' Demand for External Auditing

The recently introduced size test for proprieta ry companies could mean that some companies that were exempt would now be required to have annual audits, while some non-exempt companies would no longer be required to have annual audits. This paper considers the reasonableness of the size test and evaluates the proposition that proprietary company audits are not all legislation-driven.     

Stochastic Volatility in a Macro-Finance Model of the U.S. Term Structure of Interest Rates 1961–2004

This paper generalizes the standard homoscedastic macro-finance model by allowing for stochastic volatility, using the "square root" specification of the mainstream finance literature. Empirically, this specification dominates the standard model because it is consistent with the square root volatility found in macroeconomic time series. Thus it establishes an important connection between the stochastic volatility of the mainstream finance model and macro-economic volatility of the Okun–Friedman type. This research opens the way to a richer specification of both macro-economic and term structure models, incorporating the best features of both macro-finance and mainstream finance models.     

Globalization and the Return to Education in Australia

Reich argues that globalization will increase the relative earnings of those whose occupation involves identifying and solving problems and managing ideas. Hence, the return to education, especially education in the form of a university degree, will rise. This paper examines the return to education in Australia in the 1980s and shows that in the private sector there has been a substantial rise in the relative earnings of graduates. Due to special circumstances there has been a fall in the public sector. Previous findings of little change are the result of aggregation problems.     

Costs Associated With Going-Concern-Modified Audit Opinions: An Analysis of the Australian Audit Market

This article examines the potential costs to Australian auditors and their clients from the issuance of first-time going-concern-modified audit opinions. We examine the population of Australian companies receiving a first-time going-concern-modified audit opinion during the period 1994–97 and a matched sample of financially distressed firms receiving a clean audit opinion. Results indicate that auditor switching is positively associated with receipt of a going-concern-modified opinion. However, we find no empirical evidence that there is a self-fulfilling prophecy of increased probability of company failure following the issuance of a going-concern-modified opinion for the Australian companies in our study. Our analyses of lost audit fees indicate that auditors issuing first-time going-concern-modified audit opinions lost proportionately more fees by losing clients (through switching or company failure) than firms not issuing a going-concern-modified opinion to financially stressed clients.