Justin Yifu Lin, Hybrid Rice Innovation in China: A Study of Market-Demand Induced Technological Innovation in a Centrally-Planned Economy, The Review of Economics and Statistics, Vol. 74, No. 1 (Feb., 1992), pp. 14-20

This paper develops a model based on Schumpeter's process of creative destruction. It departs from existing models of endogenous growth in emphasizing obsolescence of old technologies induced by the accumulation of knowledge and the resulting process or industrial innovations. This has both positive and normative implications for growth. In positive terms, the prospect of a high level of research in the future can deter research today by threatening the fruits of that research with rapid obsolescence. In normative terms, obsolescence creates a negative externality from innovations, and hence a tendency for laissez-faire economies to generate too many innovations, i.e too much growth. This business-stealing effect is partly compensated by the fact that innovations tend to be too small under laissez-faire. The model possesses a unique balanced growth equilibrium in which the log of GNP follows a random walk with drift. The size of the drift is the average growth rate of the economy and it is endogenous to the model ; in particular it depends on the size and likelihood of innovations resulting from research and also on the degree of market power available to an innovator

[This study adds to recent research that assesses the value implications of earnings changes. Stock price changes associated with reported earnings innovations (typically assessed by estimating earnings response coefficients) have been characterized as related to the persistence of earnings, which is defined as the revision in expected future earnings that is implied by a current earnings innovation. Permanent earnings innovations are associated with higher multipliers than transitory ones. This stream of research stems from Kormendi and Lipe (1987) and Easton and Zmijewski (1989). These studies characterize earnings persistence as a stationary, firm-specific phenomenon that describes the evolution of earnings over time. They estimate parameters of earnings persistence from time-series data on earnings and then show that the market's pricing of earnings innovations are related to the persistence measures. Typically, this evaluation involves ex post information, so the approach is not relevant for investors' ex ante determination of pricing multipliers. This article reports three findings on the pricing of annual earnings changes. First, pricing multipliers can be evaluated contemporaneously by other information published in annual financial statements along with earnings. An investor who seeks to assess persistence and the price effect of a reported earnings change can do so by referring to other information in the financial statements. Second, in contrast to previous research, this study shows that the earnings persistence indicated by financial statements is not a fixed attribute, but changes over time and tends to revert to the mean of all firms. Correspondingly, pricing multipliers follow a similar pattern, which requires their periodic updating through financial statement analysis. Third, the multiplier of earnings changes is also related to information published in the previous year's annual report. To the extent that previous accounting reports provide forecasts of earnings that are already incorporated in prices, multipliers are lower

This study adds to recent research that assesses the value implications of earnings changes. Stock price changes associated with reported earnings innovations (typically assessed by estimating earnings response coefficients) have been characterized as related to the persistence of earnings, which is defined as the revision in expected future earnings that is implied by a current earnings innovation. Permanent earnings innovations are associated with higher multipliers than transitory ones. This stream of research stems from Kormendi and Lipe (1987) and Easton and Zmijewski (1989). These studies characterize earnings persistence as a stationary, firm-specific phenomenon that describes the evolution of earnings over time. They estimate parameters of earnings persistence from time-series data on earnings and then show that the market's pricing of earnings innovations are related to the persistence measures. Typically, this evaluation involves ex post information, so the approach is not relevant for investors' ex ante determination of pricing multipliers. This article reports three findings on the pricing of annual earnings changes. First, pricing multipliers can be evaluated contemporaneously by other information published in annual financial statements along with earnings. An investor who seeks to assess persistence and the price effect of a reported earnings change can do so by referring to other information in the financial statements. Second, in contrast to previous research, this study shows that the earnings persistence indicated by financial statements is not a fixed attribute, but changes over time and tends to revert to the mean of all firms. Correspondingly, pricing multipliers follow a similar pattern, which requires their periodic updating through financial statement analysis. Third, the multiplier of earnings changes is also related to information published in the previous year's annual report. To the extent that previous accounting reports provide forecasts of earnings that are already incorporated in prices, multipliers are lower

Overview Switzerland The Federal Republic of Germany France The United Kingdom Japan Canada The United States securitization and financial innovation non-banking activities of banking organizations the international convergence of capital adequacy requirements the 1992 single European market in financial services trends and developments concluding remarks

We show that the interest rate on Federal funds is extremely informative about future movements of real macroeconomic variables. Then we argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves; that is, the funds rate is a good indicator of monetary policy actions. Finally, using innovations to the funds rate as a measure of changes in policy, we present evidence consistent with the view that monetary policy works at least in part through "credit" (i.e., bank loans) as well as through "money" (i.e., bank deposits