Reviews the book "EEC Accounting and Harmonisation: Implementation and Impact of the Fourth Directive," edited by Sidney J. Gray and Adolf G. Coenenberg.

ABSTRACT: The study on perceptions of quality of accounting journals by Howard and Nikolai [1983] is extended to include respondents from the U.K., Australia, and New Zealand. There are highly significant correlations between the perceptions of faculty in these three countries. There is also a high correlation with the earlier U.S. study, though the ranking of a few journals is markedly different.

Most recent studies of macroeconomic behavior fall into one of two categories. The first, often called the equilibrium business cycle approach, stems from the fundamental contribution of Robert E. Lucas (1972), and related work by Thomas Sargent and Neil Wallace (1975) and many others. These studies espouse the view that a positive correlation between output and the stock of paper assets can arise if households are unable to identify the source and, therefore, the permanence of price movements. Employment and output responses in this view are driven by the intertemporal substitution effect, especially the substitution of current leisure for future consumption. Since cyclical fluctuations in employment are large relative to the corresponding real wage movements, substantial wage elasticity of labor supply is required to validate these models. The equilibrium approach to business cycles implies certain restrictions on the conduct of monetary policy. In particular, rational expectations undermine the ability of the monetary authority to influence economic activity in a systematic manner; see Sargent-Wallace for an example. Sticky wages and prices are the cornerstone of an alternative description of macroeconomic behavior. Rooted vaguely in Keynes, and more firmly in the dual decision hypothesis of Robert Clower (1984), this approach studies equilibria with quantity rationing; see Edmond Malinvaud (1977). The rationing story lacks a precise specification of the source of price stickiness, offering very little guidance about the eventual causes of price change. Considerable efforts were made in the 1970's to fill this lacuna in Keynesian macroeconomics. Beginning with work by Martin N. Baily (1974) and others, the implicit contracts literature focused on the incomplete insurability of human capital. Unable to find insurance against fluctuations in labor income elsewhere, workers demand insurance from those best placed to observe labor income-their own employers. Both wage inflexibility and layoffs, then, can be viewed as an outcome of a joint insurance-employment relationship between workers and firms; see Azariadis (1975). Critics like George Akerlof and Hajime Miyazaki (1980) soon discovered that the original contracting models could not produce layoffs without prohibiting severance pay or otherwise limiting the terms of the contract. Others pointed out that these models were determinedly microeconomic, offering few insights into the stickiness of nominal wages or the effectiveness of stabilization policy. Two quite distinct lines of research developed out of the original implicit contract ideas. One focuses on asymmetric information and implementability (see the QJE 1983 Symposium for original work and the review article by Oliver Hart, 1983) as a means of driving a wedge between the ex post marginal rates of substitution of the contractants. Under some technical assumptions, the outcome is involuntary underemployment or unemployment. We are most concerned here with the other line of research, which sought to fit labor or tDiscussants: Guillermo Calvo, Columbia University: Jo Anna Gray, Washington State University.

A bstract-We discuss the problem of testing for constant versus time varying regression coefficients. Our alternative hypothesis allows the coefficients to follow a stationary AR(1) process with unknown autoregressive parameter. Standard testing procedures are inappropriate since this parameter is identified only under the alternative. We propose a test statistic which is a function of a sequence of Score statistics, and depends only on the regressors and the OLS residuals. The distribution of the test statistic is discussed, power and size are investigated using Monte Carlo methods, and an empirical example investigating stability in the gold and silver markets is presented.

ABSTRACT This paper provides a positive theory of voluntary disclosure by firms. Previous theoretical work on disclosure of new information by firms has demonstrated that releasing public information will often make all shareholders worse off, due to an adverse risk‐sharing effect. This paper uses a general equilibrium model with endogenous information collection to demonstrate that there exists a policy of disclosure of information which makes all shareholders better off than a policy of no disclosure. The welfare improvement occurs because of explicit information cost savings and improved risk sharing. This provides a positive theory of precommitment to disclosure, because it will be unanimously voted for by stockholders and will also represent the policy that will maximize value ex ante. In addition, it provides a “missing link” in financial signalling models. Apart from the effects on information production analyzed in this paper, most existing financial signalling models are inconsistent with a firm taking actions which facilitate future signalling because release of the signal makes all investors worse off.

Arguing that the beliefs that there were no energy shortages in the US before the 1970s and that large-scale rationing requires government price controls are clearly wrong, the authors analyze the extent of the shortage, the nature of the rationing program, and the structure of the petroleum industry. They argue that regional isolation, industry concentration, and the vertical integration of the larger firms made rationing possible. In the absence of laws requiring rationing or setting prices, they focus on the hypothesis that the oil companies held prices down because they were afraid of hostile government actions. 22 references, 2 figures, 1 table.

[Little is known about the speed and accuracy of aggregate taxpayer response to an income tax law change. Using a multiple time series model, it was found that individuals and corporations quickly and relatively accurately adjust their income tax prepayments in response to a tax increase.]

ABSTRACT: A bond exchange is a transaction in which a corporation with an outstanding bond issue offers the current bondholders a new bond in exchange for the outstanding bonds. Bond exchanges affect firms by: (1) altering the cash payments to bondholders, (2) increasing reported earnings, (3) improving financial ratios such as debt/equity, and (4) affecting tax obligations. Although bond exchanges are fairly common, especially in the airline industry, these transactions may be difficult to analyze. This paper reviews the sequence of public disclosures involving an exchange offer, illustrates a present value method for evaluating bond exchanges, and compares the reported results with the "economic" results obtained from this method. Eastern Airlines' 1980 bond exchange is used for illustrative purposes.