To gain insight into the impact of the Public Company Accounting Oversight Board’s (PCAOB) auditor inspection program, I examine the association between the PCAOB’s access to inspect auditors of foreign SEC registrants and audit quality. Although the PCAOB is mandated to inspect all auditors of SEC registrants, certain foreign governments prohibit PCAOB inspections of their domestic auditors, providing variation in PCAOB inspection access that is not available when studying a sample of US companies. I find that auditors subject to PCAOB inspection access provide higher quality audits as measured by more going concern opinions, more reported material weaknesses, and less earnings management, relative to auditors not subject to PCAOB inspection access. There is no observable difference between the two sets of auditors prior to the PCAOB inspection regime. The positive effect of PCAOB inspection access on audit quality is observed in jurisdictions with, and without, a local audit regulator. Overall, the results are consistent with PCAOB inspection access being positively associated with audit quality

Arthur Okun invited me to join this panel, one presumes, to present a monetarist view of inflation. This I shall do. In my judgment the current worldwide inflWtion, like virtually all of its predecessors throughout history, stems from excessive expansion of the money supply. I believe that this could have been prevented, at least in the United States, without either loss of jobs in the long run or danger of financial collapse. The only hope of restoring reasonable price stability is to cut monetary growth to the rate of growth of full employment output and to hold it there indefinitely. Implementing such a policy will not be easy but it is our only hope. Most recent literature on inflation suffers from two serious faults: it fails to examine the problem in a sufficiently long-term perspective and it takes inadequate account of delays between causal disturbances and inflationary consequences. On the first point, most writers on inflation are preoccupied with ephemeral symptoms or temporary disturbances. Events such as a rise in the minimum wage, a poor corn crop, the formation of an international oil cartel, devaluation of the dollar vis-a-vis other major currencies -the list could on and on are capable of moving the inflation indicators upward, at least temporarily. However, such alleged causes of inflation operate only sporadically; they cannot explain a sustained rise in prices. One could write a history of inflation that would explain it as a series of unrelated accidents. As social

This paper considers equilibrium quit turnover in a frictional labor market with costly hiring by firms, where large firms employ many workers and face both aggregate and firm specific productivity shocks. There is exogenous firm turnover as new (small) startups enter the market over time, while some existing firms fail and exit. Individual firm growth rates are disperse and evolve stochastically. The paper highlights how dynamic monopsony, where firms trade off lower wages against higher (endogenous) employee quit rates, yields excessive job-to-job quits. Such quits directly crowd out the reemployment prospects of the unemployed. With finite firm productivity states, stochastic equilibrium is fully tractable and can be computed using standard numerical techniques.

We explore the link between open-market share repurchases (OMRs) and asymmetric information based on financial reporting quality and find that opaque firms experience positive abnormal returns of twice the magnitude of those of transparent firms. These significant differences remain after controlling for governance, earnings management, and firm characteristics. We document significantly positive long-run postannouncement returns for opaque firms, but not for transparent firms. We find that takeover activity and premiums rise with repurchase activity by opaque firms, which may explain some of the wealth effects. Our results suggest that asymmetric information plays an important role in the wealth effects around OMRs.

With increased interest in voluntary sustainability reports from investors and other stakeholders, more companies are having these reports assured. The issue of what is considered material in these assurance engagements is important, and yet research on materiality has focused only on financial statement audits. This article reports the results of an experiment where auditors assess the materiality of audit differences in the same magnitude for both a financial audit and a sustainability (water) assurance engagement. Two factors, the risk of breaching a contract and community impact, are manipulated between‐subjects. We find that auditors assess the materiality of an audit difference significantly higher for a financial case than for a water case. This difference is significantly greater when there is no risk of breaching a contract than when there is a risk of breaching a contract. The risk of breaching a contract has a stronger effect on the difference in auditors' materiality assessments when there is no community impact than when there is a community impact. Overall our findings suggest that qualitative factors have a greater impact on sustainability (water) materiality assessments than on financial statement materiality assessments when an audit difference is between 5 percent and 10 percent of a relevant base. Understanding the factors that impact material judgments in sustainability reports is important as these factors affect the reliability of the reported disclosures.

We provide the first estimates of the effects of minimum wages on employment flows in the US labor market, identifying the impact by using policy discontinuities at state borders. We find that minimum wages have a sizable negative effect on employment flows but not on stocks. Separations and accessions fall among affected workers, especially those with low tenure. We do not find changes in the duration of nonemployment for separations or hires. This evidence is consistent with search models with endogenous separations.

When I left the University of Chicago to become Secretary of Labor about a quarter century ago, I recognized that I was leaving the role of professional economist and taking on the responsibilities of a player in the public policy process. But I quickly discovered that I could not get away from economics: habits of thinking stay with you. So I have found myself to be still an economist, responsible for action. I had some helpful tutorials along the way. I recall a session with the Ways and Means Committee and its chairman, Wilbur Mills, not long after I started as Secretary of Labor. The subject was unemployment compensation. I was invited to take part in the Committee's deliberations and did so vigorously. The Chairman interrupted me: Mr. Secretary, when you are in your classroom, you are accustomed to getting your way, down here, we compromise. But I also learned that the real task is to know when to compromise and when to hold firm, how to move tactically while maintaining your strategy. Late one night, some two years later, when I was budget director and we were at the end of the long annual struggle to contain spending, I asked a veteran civil servant, Sam Cohen, if there was really any difference between Republicans and Democrats when it came to the budget. They both spend money, he replied, but the Democrats enjoy it. So cuts in government spending are easier to advocate than to execute. That is the part that takes real conviction, in the Congress as well as in the Executive Branch. I have also realized increasingly that my training in economics has had a major influence on the way I think about public policy tasks, even when they have no particular relationship to economics. Our discipline makes one think ahead, ask about indirect consequences, take note of variables that may not be directly under consideration. Economics deals with markets and how they work and seeks out the wide ramifications of policies and events across industries and over time. Economic policies are partially anticipated before enactment and continue to affect the economy, often in ways not anticipated, long after they have been put in place. Results occur, with a lag. The key to a successful policy is often to get the right process going. While the economist is accustomed to the concept of lags, the politician likes instant results. The tension comes because, as I have seen on many occasions, the economist's lag is the politician's nightmare. So my training as an economist has taught me also to be a strategist who tries to understand the constellation of forces present in a situation and to arrange them to point toward a desirable result. A kind of patient impatience is required. With this in mind I address you about some opportunities and problems facing us today.

We explore the motives and consequences of bond tender offers announced in connection with mergers and acquisitions (M&A). We find merging firms use bond tender offers strategically to renegotiate with bondholders to gain financial flexibility by reducing leverage and eliminating covenants, and to curtail the coinsurance benefits associated with M&A. Moreover, we find bondholder wealth effects depend not only on the bond's own characteristics, but also on the characteristics of its sibling bonds. Finally, the use of bond tender offers in M&A is associated with increased likelihood of deal consummation and lower acquisition premiums.