WORLD OUTLOOK

Events in the Gulf have finally brought an end to the world economic boom of the last eight years. The oil price shock itself is only partly responsible for the downturn. The previous tightening of monetary policy in the face of inflationary pressures and the end of a rapid period of credit and asset price expansion had severely weakened the ability of some economies to respond to the shock. This is reflected in the diversity of response, most obviously in the United States where Fed fine tuning and the credit crunch have already weakened the economy. The rise in oil prices has led to a sudden collapse in consumer confidence and a swift cutback in output. Although we do not expect the recession to be deep, the financial problems will delay recovery. The Japanese economy was already in financial difficulties before the shock, although the real economy was stronger and here we expect a sharp deceleration from almost 6 per cent growth last year to around 3.5 per cent. In contrast the German economy, partly shielded by the substantial appreciation of the DM over the last year, has been affected less by the oil price shock and we expect the consumer and investment boom to continue this year as the economies merge. This provides a welcome boost to other European economies.     

Maximizing benefits in project selection: a hybrid approach

Charitable foundations and government programmes should endeavour to allocate their limited resources to best serve their constituents. Yet, mathematical programming techniques are rarely used despite overwhelming evidence of their superiority in selecting projects that yield higher levels of total benefits. We present a novel ‘hybrid selection model’ that combines binary linear programming and heuristic rank-based models applied to two case studies. The first case focuses on providing services to women and shows a hybrid model would have selected the top three ‘signature’ projects and maintained an above-average overall project benefit while securing a 180% improvement in the number of projects funded, a 66% improvement in the number of women served and a 132% improvement in the total benefit achieved. In the second case, we apply the hybrid approach to data from the US government’s largest forest preservation programme and demonstrate that the hybrid approach could allow the programme to select up to 11 top-scoring projects while still achieving a 97% gain in the total overall benefit compared to their traditional method. These case studies show that the hybrid approach has the potential to be applied in a variety of settings and improve how foundations and programmes achieve their goals.     

Behavioral spillovers and cognitive load in multiple games: An experimental study

We present evidence from laboratory experiments of behavioral spillovers and cognitive load that spread across strategic contexts. In the experiments, subjects play two distinct games simultaneously with different opponents. We find that the strategies chosen and the efficiency of outcomes in one game depends on the other game that the subject plays, and that play is altered in predictable directions. We develop a measure of behavioral variation in a normal form game, outcome entropy, and find that prevalent strategies in games with low outcome entropy are more likely to be used in the games with high outcome entropy, but not vice versa. Taken together, these findings suggest that people do not treat strategic situations in isolation, but may instead develop heuristics that they apply across games.     

WORLDOUTLOOK

German monetary unification is expected to result in a major expansion in autonomous demand from East Germany. In economic terms this is equivalent to a fiscal shock to West Germany broadly similar to that experienced in the US in the early years of Mr. Reagan's Presidency. Led by the Bundes bank, the monetary authorities' response is again likely to be a tightening of policy, leading to several years of high real interest rates. Overall, the combined monetary-fiscal shock should strengthen growth with only moderate increases in inflation. Germany is expected to grow very rapidly in the -per cent range for several years, with only a slight upturn in inflation. Japan, after a pause over the next year, should be able to return to its under lying growth path fairly quickly. However the US situation is more precarious. FUN adjustment from the previous Reagan shock has not yet taken place, leaving the US vulnerably dependent on increasingly scarce imported capital. In the absence of a significant *peace dividend: the result is the necessity of continued tight policy and sluggish growth in the American economy. US growth stays around 2 per cent, but this allows a substantial reduction in the current account deficit.     

The London Business School with Gower Publishing

Last year earnings growth fell below the lowest rates of increase experienced in the 1980s. At the time this was seen as primarily the result of the deflationary squeeze produced by ERM membership. It was too early to proclaim a new era of responsible wage bargaining until the recovery had occurred. Since then not only has sterling lost its E m anchor, and suffered a sharp depreciation, but an upswing in activity has also been established. However, in spite of the revival in potential inflationary forces, earnings growth has continued to decelerate in 1993. It is clear that the last recession has had a more pronounced effect on nominal wages than its predecessor. In terms of real wages, however, there appears to have been little change, implying that the fall in nominal wages is due solely to lower price inflation. The important question for the present pay round is how will the labour market respond to the recovery? Have the supply-side policies pursued in the 1980s had a decisive effect, allowing the UK to make the transition to low, stable inflation rates in the 1990s? Or will there be a reversion to traditional inflationary practices?     

Luxury hotels mushrooming and extravagant governments

This paper empirically examines the effect of nontax revenue on demands for luxury hotels in China where the strict public financial supervision is not well-established. Results indicate the nontax revenue significantly influences luxury hotel demands across the country and that government demands have crowding out effect on private demands for luxury hotels, all of which appear more salient in Chinese underdeveloped areas with more severely deficient public financial supervision.     

Audit Education for Future Professionals: Perceptions of New Zealand Auditors

Audit professionals are charged with gathering evidence and expressing their opinions on the financial claims made by others. In New Zealand, as elsewhere, these opinions are relied upon for a myriad of decisions as to the economic position and operations of an organisation. The educational experience that future professionals receive in their tertiary study is important because it lays the pedagogical foundation for this role. The aim of this study is to evaluate those teaching practices, subjects and techniques that might be of value to future audit professionals. The analysis is uniquely from the perspective of the professional members who are most likely to benefit from students' experiences. The literature is used to identify relevant questions, and a survey of 360 professional auditors in New Zealand yielded a 36.4% response rate. A triangulated analysis of comments and scaled questions reveals that these professionals are concerned with communication, small business engagements and the relationships between, for example, risk and planning and independence and ethics. Findings also confirm the value of experiential and practice-informed learning and direct us to a few topics that may accommodate non-traditional teaching methods. Conclusions consider implications for teaching and future research.     

Dietary intake and the contribution of snacks among adolescents during the summer months

Abstract Adolescent diets are often cited as nutritionally inadequate, possibly because of their reported snacking habits. This study examined 48 adolescent diets using a 24-h diet recall and a 2-day food record during summer months. Total intake and snacks identified by the subjects were analysed for energy and nutrient content. Male and female subjects reported similar intakes of fat, cholesterol and sugar. Ninety-eight per cent of subjects reported at least one snack daily. Snacks contributed 25% to the total energy, vitamin C, calcium and magnesium intakes. Although these subjects were not adhering to national recommendations for fat and sugar, the snacks they consumed contributed positively to the nutrient content of adolescent diets.