Finance theory suggests that changes in exchange rates should have little influence on asset prices in a world with integrated capital markets. Indeed, the existing literature examining the relationship between international stock prices and exchange rates finds little evidence of systematic exchange rate exposure. We argue in this paper that the absence of evidence may be due to restrictions imposed on the sample of data and the empirical specifications used in previous studies. We study a broad sample of firms in eight countries over an eighteen-year period. We find that firm-level and industry-level share values are significantly influenced by exchange rates. Further, we do not find evidence that exchange rate exposure is falling (or becoming less statistically significant) over time. Our results suggest that significant firm, industry and country-specific differences remain even as financial markets become more and more integrated.

An innovation in this paper is to introduce a time‐to‐build technology for the production of market capital into a model with home production. Our main finding is that the two anomalies that have plagued all household production models—the positive correlation between business and household investment, and household investment's leading business investment over the business cycle—are resolved when time to build is added.

Tax compliance studies usually focus on the effect of enforce-ment spending on tax evasion. Reliable estimates are difficult to obtain because evasion data are often suspect. This note shows how tax revenues can be used instead of evasion data to estimate the impact of changes in enforcement spending. Applying our method to Chilean data, we find that $1 (USD) of additional enforcement spending increases VAT revenues by $31. Moreover, current levels of spending could increase by 40% and still be within sample values. Hence, a 10% increase in spending could reduce evasion from its current rate of 23% to 20%.

In spring 2000, we conducted a national survey of academic economists to determine how economics is taught in four different types of undergraduate courses (Principles, Intermediate Theory, Statistics and Econometrics, and other upper-division courses) at institutions in the five Carnegie classifications (research, doctoral, master’s, baccalaureate, and associate), as listed in A Classification of Institutions of Higher Education, 1994 Edition. This new survey replicates our 1995 survey (Becker and Watts, 1996). Therefore, we can compare the results from the two surveys to document changes in teaching methods, as well as the related academic issues that were addressed in the background information section of the surveys. A key reason for believing that teaching methods might have changed during this period was the sharp decrease in economics enrollments during the early 1990’s (Becker, 1997; John Siegfried and David K. Round, 2001). As we have documented elsewhere (Becker and Watts, 1998), there is evidence that economists are less likely to use non-lecture teaching methods than instructors in other fields, and that students rate economics instructors somewhat lower than they rate other instructors. Changing teaching methods and increasing the importance of teaching within economics departments, in response to falling enrollments, is therefore a plausible and endogenous response for faculty members and departments concerned about losing resources. Furthermore, there is at least circumstantial evidence that economists are devoting more attention to teaching than in the recent past (Becker, 2000). Since our 1995 survey, several books have been published to illustrate how economists can use a wide range of alternative teaching methods in undergraduate courses (e.g., Becker and Watts, 1998; William Walstad and Philip Saunders, 1998). Other books have appeared focusing on specific teaching methods, such as using classroom experiments, spreadsheet applications, or active-learning and cooperative-learning assignments (e.g., Diane Keenan and Mark H. Maier, 1995; Tod S. Porter and Teresa Riley, 1995; Theodore Bergstrom and John H. Miller, 1997; Denise Hazlett, 1999). Becker (2000) documents the increase in AEA sessions devoted to teaching economics at the annual meetings of the Allied Social Sciences Association during the mid-1990’s. At the 1998–2000 Allied Social Sciences Association (ASSA) meetings the number of sessions devoted to teaching economics ranged from 11 to 14, and presented sessions dealt with such topics as teaching economics in the transition economies (chaired by World Bank chief economist Joseph Stiglitz), a retrospective on Nobel laureate Paul Samuelson’s principles textbook, how faculty advisors can deal with student apprehensiveness about taking economics courses, and teaching business economics (chaired by Nobel laureate Ronald Coase). As recently as the 1996 ASSA meetings in San Francisco there were only six sessions on teaching economics, and at the 1994 meetings in Boston there were only four such sessions. Similarly small numbers of sessions were scheduled through the 1980’s. Here we ask whether any increased emphasis on teaching in economics departments has led to changes in how economics is taught. Do academic economists report that they are now * Becker: Department of Economics, Indiana University, Bloomington, IN 47405 (e-mail: [email protected]), and Adjunct Professor, School of International Business, University of South Australia; Watts: Department of Economics, Purdue University, West Lafayette, IN 47905 (e-mail: [email protected]). We thank Julia K. Huffer, Kevin M. Green, Siddhartha Kapoor, Chatchai Meteveravong, Alexandre Skiba, and Suzanne Becker for help in the mailing, data entry and tabulation, and preparing of this paper. Financial support from the Purdue University Center for International Business Education and Research, University of South Australia School of International Business, and the National Council on Economic Education through its sponsorship of the Journal of Economic Education is gratefully acknowledged.

Building on the Dechow et al. (1998) model of the accrual process, this study investigates the role of accruals in predicting future cash flows. The model shows that each accrual component reflects different information relating to future cash flows; aggregate earnings masks this information. As predicted, disaggregating accruals into major components—change in accounts receivable, change in accounts payable, change in inventory, depreciation, amortization, and other accruals—significantly enhances predictive ability. Each accrual component, including depreciation and amortization, is significant with the predicted sign in predicting future cash flows, incremental to current cash flow. The cash flow and accrual components of current earnings have substantially more predictive ability for future cash flows than several lags of aggregate earnings. The inferences are robust to alternative specifications, including controlling for operating cash cycle and industry membership.

We study the properties of unconditional minimum‐variance portfolios in the presence of conditioning information. Such portfolios attain the smallest variance for a given mean among all possible portfolios formed using the conditioning information. We provide explicit solutions for n risky assets, either with or without a riskless asset. Our solutions provide insights into portfolio management problems and issues in conditional asset pricing.

We propose regression‐based tests for mean‐variance spanning in the case where investors face market frictions such as short sales constraints and transaction costs. We test whether U.S. investors can extend their efficient set by investing in emerging markets when accounting for such frictions. For the period after the major liberalizations in the emerging markets, we find strong evidence for diversification benefits when market frictions are excluded, but this evidence disappears when investors face short sales constraints or small transaction costs. Although simulations suggest that there is a possible small‐sample bias, this bias appears to be too small to affect our conclusions.

Estimating the Knowledge-Capital Model of the Multinational Enterprise by David L. Carr, James R. Markusen and Keith E. Maskus. Published in volume 91, issue 3, pages 693-708 of American Economic Review, June 2001