Signaling, investment opportunities, and dividend announcements

This article examines potential explanations for the wealtheffects surrounding dividend change announcements. We find thatnew information concerning managers' investment policies isnot revealed at the time of the dividend announcement. We alsofind that dividend increases (decreases) are associated withsubsequent significant increases (decreases) in capital expendituresover the three years following the dividend change, and thatdividend change announcements are associated with revisionsin analysts' forecasts of current earnings. These results areconsistent with the cash flow signaling hypothesis rather thanthe free cash flow hypothesis as an explanation for the observedstock price reactions to dividend change announcements.     

Complementarity Between Money and Capital in a Developing Economy: A Test of Stability

The author argues that the success of a policy of financial liberalization in stimulating the rate of capital formation depends on the extent to which the demand for money and the investment functions are stable. Time varying parameter technique is used to test alternative specifications of the demand for money and the investment functions. The author concludes that a modified version of the McKinnon hypothesis explains the success of the monetary policy pursued by the Reserve Bank of India during the period under review. [310]     

The elasticity of substitution in India's manufacturing sector

Using cross-section data and the translog cost function this paper examines the substitution possibilities between capital and materials and labor and materials since raw materials might be used to overcome the bottlenecks caused by shortages of physical capital and skilled labor. Three significant conclusions are: (a) Since materials are substitutable for both capital and labor to a considerable extent, capital and skilled labor may not be a binding constraint on growth. Agricultural materials expansion may substitute for these inputs and lead to expansion in the industrial sector. (b) Fixed proportion models are not warranted in India without modification, and (c) separability tests showed that materials must be included in the production function.     

Money and the production function: A case study of France

Zusammenfassung Geld in der Produktionsfunktion: Eine Fallstudie für Frankreich. — Dieser Aufsatz benutzt Daten für Frankreich (1950–1973), um zu prüfen, ob (a) reale Geldbest?nde eine Grenzproduktivit?t haben, die mit der physischer Inputs vergleichbar ist, und ob (b) die Einführung von Geld in die Produktionsfunktion aufgrund einer Vielzahl von Strukturver?nderungen zu einer Instabilit?t der Produktionsbeziehungen führt. Die Autoren ermitteln eine Zeitreihe für das Grenzprodukt des Geldes. Indem sie die Technik zeitlich variierender Parameter in ihrer Regressionsanalyse verwenden, finden sie heraus, da\ die Einführung von Geld in die aggregierte Produktionsfunktion keine Instabilit?t der Produktionsbeziehungen mit sich gebracht hat.

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Résumé La monnaie dans la fonction de production: une étude de cas pour la France. — En utilisant les données pour la France, 1950–1973, cet article essaie de tester (a) si les balances de monnaie réelle ont une productivité marginale qui est similaire à celle des inputs physiques, et (b) si l’introduction de la monnaie dans la fonction de production mène à l’instabilité dans les relations de production due à toutes sortes des changements structurels. Les auteurs présentent une série chronologique du produit marginal de monnaie. En utilisant une technique des paramètres variants sur le temps ils trouvent aussi que l’introduction de la monnaie dans une fonction agrégée de production ne mène pas à une instabilité dans les relations de production.

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Resumen Dinero en la función de producción: un estudio del caso de Francia. — Usando datos de Francia para el periódo 1958–1973, en este artículo se intenta someter a prueba, (a) si los balances de dinero real tienen una productividad similar a la de insumos fisicos y, (b) si la introducci?n de dinero en la función de producción lleva a una inestabilidad en las relaciones de producción debido a una variedad de cambios estructurales. Los autores presentan una serie temporal del producto marginal del dinero. Usando una técnica de paràmetros variables en el tiempo también descubren que la introducción del dinero en la función de producción agregada no imparte inestabilidad en las relaciones de producción.

     

WEALTH AND CONSUMER HORIZON: EVIDENCE FROM A DEVELOPING ECONOMY

This paper presents new evidence on the length of consumer horizon, which represents an important aspect of the Permanent Income Hypothesis. It uses data on private wealth of India for 1949–50 to 1974–75. Time varying parameter estimation is used to derive annual values of consumer discount rate and horizon. The findings support Friedman's view that horizon is approximately three years long. The author discusses the plausibility of his findings.     

The permanent income hypothesis in an underdeveloped economy

After a concise but critical survey of several tests of the permanent income hypothesis (PIH), the authors advance their own test for India using annual data from 1919–1960. It employs Friedman's technique for calculating the permanent value of a variable. Two different specifications of the model are tested, using different values of the consumer's ‘horizon.’ In almost all cases it is found that the marginal propensity to consume out of transitory income is very similar to the marginal propensity to consume out of permanent income. The authors conclude that even a looser variant of the PIH is not valid for India. However, no valid generalization with respect to the appropriate planning horizon can be made, for the PIH was almost equally invalid with a horizon of one, two and two-and-a-half years. The authors briefly discuss the policy implications of their results for the savings efforts in underdeveloped countries.