Some Potential Linkages for Input-Output Analysis with Flow-of-Funds

Three major, interrelated accounting statements, at the frontiers of quantitative economic analysis, are three interrelated systems, namely: (1) National income and product accounts (NIPA), (2) The input-output tableaux, (IO), and (3) flow-of- funds accounts (FF). The third-mentioned system is somewhat less available and used in only limited areas of macroeconomic analysis. This paper is mainly concerned with use of FF accounting systems. This system shows where financial resources originate, and where they go in support of real capital formation. In this respect, interest rates and other market-based financial rates are of key importance. While much macroeconomic analysis is based on the rates that fit the yield curve, showing the interest rate structure over various maturities of debt associated with a given degree of risk. In contrast, the FF accounts throw light on the whole spectrum of interest rates, across maturities and debt qualities. For example, in analysis of the real estate market and funding of capital formation there, it is important to have a full understanding of the course of mortgage rates of different maturities and qualities. In short, it is necessary to develop a full appreciation of supply and demand forces in the mortgage market, which often is not obviously related to movements of the operative rate for monetary policy, such as very short-term inter bank rates or call money rates. This paper attempts to provide material from the flow-of-funds accounts that would make it possible to analyze the movement of relevant mortgage rates or whatever other rates are needed to understand the financing of capital formation in real estate.     

Housing Transactions and the Changing Decisions of Young Households in Britain: The Microeconomic Evidence

In this second of two related papers in this issue, the causes of declining levels of housing transactions in Britain during the 1990s are explored. The lower transaction levels resulted partly from the changing behavior of young individuals. Both household formation and owner–occupation rates of these groups also fell sharply. Using panel data, we investigate the causes of reduced new household formation and owner–occupation, finding that changes in the income distribution away from young cohorts have been an important factor.     

Economic Growth and Productivity Gains from Capital Inflow: A Rejoinder

Journal of Quantitative Economics -     

INITIAL PUBLIC OFFERINGS: GOING BY THE BOOK

In the U.S., and increasingly in other countries as well, IPO securities are marketed to investors in a process known as "book-building"—one that amounts to polling institutional investors to establish a demand schedule for the issue and then allotting stock to individual investors according to the strength of their professed interest. Although book-building methods require use of discriminatory tactics that have attracted strong criticism from investors and regulators, this article defends such practices by demonstrating that book-building is more efficient than alternative methods. It effectively allows issuers to increase the net proceeds of their offerings by making better use of information about market demand conditions.
In the process of explaining the efficiency of the book-building method, this article also offers a plausible explanation for a phenomenon that has long puzzled economists: the systematic underpricing of IPOs. The key to the success of a book-building effort lies in the use of a strategic pricing and allocation policy designed to offset the investor's incentive to understate his or her interest in an IPO. By committing to favor investors who provide strong indications of interest with relatively large allocations of underpriced shares, the investment bank can limit the distortion of investor's incentives in bidding and so increase the level of proceeds the issuing firm can expect to generate from its IPO.     

Trading and Pricing in Upstairs and Downstairs Stock Markets

We provide empirical evidence on the economic benefits of negotiatingtrades in the upstairs trading room of brokerage firms relativeto the downstairs market. Using Helsinki Stock Exchange data,we find that upstairs trades tend to have lower informationcontent and lower price impacts than downstairs trades. Thisis consistent with the hypotheses that the upstairs market isbetter at pricing uninformed liquidity trades and that upstairsbrokers can give better prices to their customers if they knowthe unexpressed demands of other customers. We find that theseeconomic benefits depend on price discovery occurring in thedownstairs market.     

Do Unions Affect Employer Compliance with the Law? New Zealand Evidence for Age Discrimination

Over the last thirty years, collective rights to organize into unions, bargain collectively and strike have been weakened in both New Zealand and the UK. At the same time, individual rights to due process and to protection from discriminatory or unjust management decisions have been strengthened, leading some to conclude that collective and individual rights are unrelated, incompatible or mutually exclusive. On the contrary, we use evidence of employer compliance with anti‐age provisions in the New Zealand Human Rights Act to show that the two sets of rights can be highly complementary: the presence of unions strengthens individual protection from discriminatory treatment.     

Corporate Reporting and Urgent Issues Group Abstracts: The Impact of UIG 4 ON THE Australian Extractive Industries

The Urgent Issues Group (UIG) was established in 1994 to overcome the inability of Australian standard-setters to deal promptly with significant reporting issues. One of its first issues was accounting for restoration obligations, with the subsequent issue in August 1995 of UIG Abstract 4 Disclosure of Accounting Policies for Restoration Obligations in the Extractive Industries. This study reports on the effect of the introduction of UIG 4 on the reporting practices of companies in the extractive industries. Despite an increase in the number of companies disclosing their accounting policy and the level of information provided, the comparability, and therefore usefulness, of disclosure after the introduction of UIG 4 is still questionable.