price decontrol the microeconomic case for the big bang approach the paper presents the microeconomic case for rapid and comprehensive price decontrol as the appropriate first step in the transition to the market to make our point we consider the likely impact of the big bang price decontrol on a former socialist economy with particular attention to the welfare consequences for the consumer of eliminating shortages and queues the costs of monopoly power of state enterprises the possibility of major disruptions in the intermediate goods markets and the politico economic issues involved copyright 1991 by oxford university press

the informational content of implied volatility implied volatility is widely believed to be informationally superior to historical volatility because it is the markets forecast of future volatility but for s p 100 index options the most actively traded contract in the united states we find implied volatility in aggregate and across subsamples separated by maturity and strike price implied volatility has virtually no correlation with future volatility and it does not incorporate the information contained in recent observed volatility article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a comparison of event study methodologies using daily stock returns a simulation approach accounting research studies commonly use measures of abnormal security returns to test hypotheses about accounting information and policies alternative methods are used in these studies to detect abnormal performance and thereby examine the information content of identified events the ability of these methods to detect abnormal returns using simulation techniques is examined by brown and warner 1980 1984 morse 1984 addresses this issue analytically the analytical approach presumes that the event study data is generated by the process modeled while the simulation approach uses the security return data generated by the market simulation provides a tractable means of dealing with situations where an analytical approach may yield results suggesting direction but not magnitude or where such techniques are unusually cumbersome both limitations face us in this study brown and warner 1980 use monthly data to examine the comparative abilities of several combinations of return generating models and

on measuring the risk of common stocks implied by options prices a note this paper examines the implied standard deviation isd estimated from transactons data on options using the black scholes pricing model it was found that the distribution of the isd is symmetric though not normal also the isd based on the last daily observation deviates significantly from the daily average isd it is suggested that the daily average is a more reliable estimate of the standard deviation

pervasive shortages under socialism we present a new theory of pervasive shortages under socialism based on the assumption that the planners are self interested because the planners meaning bureaucrats in the ministries and managers offirms cannot keep the official profits that firms earn it is in their interest to create shortages of output and to collect bribes from consumers the theory implies that 1 an increase in the official price of a good might reduce output 2 market socialism is bound to fail even without computational complexities facing the planners and 3 price liberalization will succeed only iffirms get to keep their profits

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

assessing the regional economic impacts of defense activities a survey of methods defense activities exercised in a specific region may alter the region s economic performance an accurate assessment of the potential economic impacts of defense activities is a valuable undertaking to enable regional planners to prepare for changes the variety in the methods among others input output models economic base models keynesian regional multipliers fixed effects estimators and case study approaches inspired by geography sociology and political science can pose a dilemma we detail the historical and theoretical background of each method as well as select exemplary cases where these methods were applied by examining old and new methods we aim to construct a typology that could be valuable to all stakeholders in this sense defense economics can also contribute to the allied social sciences by outlining evaluation methods that may be applicable to other fields

strong legacies and weak markets bulgarian state owned enterprises during early transition the authors examine the factors affecting the performance of state owned enterprises soes during early transition to a market economy data come from a longitudinal study of a representative sample of bulgarian soes for the period from 1989 the last year under communism to 1993 three years after major macroeconomic shifts they investigate how changes in authority structure work organization technology marketing strategy and organizational boundaries during these years affected organizational performance in 1993 they also assess the degree of path dependence in performance and the role of competitive industry conditions numerous organizational changes made by soes during early transition had little effect on performance yet organizational performance from 1989 to 1993 was highly path dependent although this dependence was mediated by the competitive conditions stronger markets displayed less path dependence overall the results favor the interpretations derived from selected neo institutional and ecological perspectives of organizational sociology over neoclassical economic interpretations

implied spot rates as predictors of currency returns a note currency call option transactions data and the black scholes option pricing model as modified by merton for continuous dividends and as adapted to currency options by biger and hull and by garman and kohlhagen are used to imply spot foreign exchange rates the proportional deviation between implied and simultaneously observed spot rates is found to be a direct and statistically significant determinant of subsequent returns on foreign currency holdings after controlling for interest rate differentials further an ex ante trading rule reveals that the additional information contained in implied rates often is sufficient to generate significant economic profits manaster and rendleman 18 in a recent study of the informational efficiency of the u s stock market investigate the ability of call option prices to predict through implied stock prices the equilibrium values of their underlying common stocks in an ex post test manaster and rendleman find that closing option prices contain information beyond that reflected in closing stock prices due to data synchronization problems however these authors are unable to distinguish whether these results reflect superior or simply more recent information in an ex ante test manaster and rendleman are unable to reject the null hypothesis of no additional information content in implied stock prices bhattacharya 1 employing synchronized transactions data finds that option prices possess information not contained in contemporaneous stock prices although it is not clear whether the value of this information exceeds associated trading costs jennings and starks 15 provide evidence supporting the stock options market s role in determining equilibrium stock prices specifically jennings and starks examine stock price adjustments to quarterly earnings announcements using samples of firms with and without listed options and find that nonoption firms require substantially more time to adjust similar to stock options the possibility exists that foreign currency options contain information beyond that represented in their underlying market spot exchange rates this study extends the manaster and rendleman methodology to call options on foreign exchange to investigate empirically this possibility specifically this is accomplished by testing whether daily exchange rates that are implied from currency option prices and a version of the black and scholes 3 option pricing model opm contain information that may be employed to signal profitable trading strategies in foreign exchange currency option transactions data are supplied by the philadelphia stock exchange phlx results

the political economy of restructuring and privatization in eastern europe this paper reports some of the recent research in the political economy of transition in central and eastern europe with special emphasis on restructuring and privatization this line of research is concerned with the political feasibility of reform packages and the effect of political constraints on the design of reforms political constraints appear to play a major role in economic transition 2 in poland transition started with a homogeneous solidarity led government enjoying great legitimacy l balcerowicz the finance minister who had launched reform in january 1990 had however to leave office and part of his policies are now being reversed parliament is fragmented government duration is becoming increasingly short workers are striking against privatization plans czechoslovakia is breaking up partly because the slovak population is not ready to follow the rhythm of reforms initiated by v klaus in prague the support for e gai dar s transition program in russia has dwindled among the population conservative forces are gathering momentum alarming neonazi manifestations in east germany are an indicator of the low tolerance of the population for the changes imposed on them some countries are doing better hungary is doing comparatively well with a more stable political situation and relative successes in reforms allowing it to attract foreign direct investment china is experiencing a rapid expansion of the non state sector and smooth advances in the reform process in a context of sustained economic growth qian and xu 1992 these two countries

success and failure of reform insights from the transition of agriculture this paper analyzes the linkages between the reform strategies in transition countries and economic performance the authors focus on agriculture because of the sharpness of the policy changes fundamental differences among countries and relative simplicity of agricultural relationships the authors document post reform performance in the transition countries of asia and europe the authors show how a pricing reform and subsidy reductions b land rights reform and policies that affect farm restructuring and c the presence institutions that facilitate exchange either markets or market substitutes affect output and productivity the paper ends with general lessons on reforms and transition

alternative measures of profit margin an empirical study of the potential information content of current cost accounting the primary purpose of this study is to investigate the link between price changes in product markets and price changes in financial markets the nature of the association is central to evaluating the information content of current cost accounting measurements such as those promulgated in the sec s accounting series release no 190 asr 190 and the fasb s statement of financial accounting standards no 33 sfas 33 although both asr 190 and sfas 33 state that financial statements based only on historical costs do not provide investors with sufficient information to assess the underlying economics of firms in periods of rapidly changing prices empirical evidence suggests there was no apparent reaction to the initial replacement cost releases mandated by asr 190 e g see beaver christie and griffin 1980 1 this study offers one explanation for the lack of an observed market

complete markets informed trading and equity option introductions this paper proposes and tests a new hypothesis concerning the price impact of option introductions on the underlying asset we argue that the leverage properties of options induce a higher level of informed trading in the aggregate market underlying plus derivative resulting in excess listing day price movements in the newly optioned equity using an alternative dataset our results suggest that this may be an explanation for the observed positive than negative excess listing day returns of us optioned stocks over the past thirty years

gradualism versus big bang speed and sustainability of reforms a beneficial reform may be blocked by a majority if it is implemented by a big bang but the same reform may succeed with an optimally designed gradualist approach a gradualist approach can sometimes split opposition force and is in this sense more politically sustainable on the other hand if both approaches are politically preferred to no reform a big bang is often preferred to gradualism in terms of both political support as well as economic efficiency

information about bank risk in options prices abstract the volatility of its share price reflects the volatility of the market value of a bank s assets we present data for the volatilities of individual banks shares that are implied by the prices of options on the banks shares we present evidence that implied volatilities iv s better forecast actual future volatilities of share prices than historical volatilities do banks iv s are correlated with marketwide volatility with the levels of their own share prices with their own subordinated debt yield spreads and with other banks iv s bank capital reduces the response of iv s to market volatility iv s are likely to add information about bank risk that is timely cheap objective and useful

models of stock returns a comparison in this paper a discrete mixture of normal distributions is proposed to explain the observed significant kurtosis fat tails and significant positive skewness in the distribution of daily rates of returns for a sample of common stocks and indexes stationarity tests on the parameter estimates of this discrete mixture of normal distributions model revealed significant differences in the mean estimates that can explain the observed skewness and significant differences in the variance estimates that can explain the observed kurtosis an alternative explanation for the observed fat tails is the symmetric student model the result of a comparison between the models is that the discrete mixture of normal distributions model has substantially more descriptive validity than the student model for many years both financial economists and statisticians have been concerned with the description of stock market returns the form of the distribution of stock returns is a crucial assumption for mean variance portfolio theory theoretical models of capital asset prices and the prices of contingent claims for example understanding the behavior of the variance is essential to option pricing models empirical tests of asset pricing models and the efficient markets hypothesis draw statistical inferences that are also conditional on distributional assumptions the most convenient assumption for financial theory and empirical methods is that the distribution of security rates of return be multivariate normal with parameters that are stationary over time since the normal distribution is stable under addition any arbitrary portfolio of stocks will also be normally distributed with the additional assumption of risk aversion mean variance theory follows furthermore the assumptions of normality and parameter stationarity are required for most of the econometric techniques typically used in empirical research tests of the normality hypothesis on the daily returns of the dow jones industrial stocks by fama 121 revealed more kurtosis fatter tails than that predicted from a sample of independent and identically distributed normal variates fama concluded from this evidence that the distribution of price changes conforms better to the stable paretian distribution with characteristic exponent

the interrelation of stock and options market trading volume data this research empirically investigates the relation between common stock and call option trading volumes the paper hyothesizes and tests a sequential flow of information between the stock and option markets if information trading for cboe listed firms is predominantly accomplished through option trading then existing research methodologies may be biased against finding any significant economic consequences in those instances where option listing is an important variable results indicate that trading in call options leads trading in the underlying shares with a one day lag black 2 suggests that information traders may prefer trading in options rather than shares due to economic incentives provided by reduced transaction costs capital requirements and trading restrictions and due to the greater action afforded by option trading manaster and rendleman 12 empirically support black s 2 option information trading preference finding incremental information content in option prices up to twenty four hours prior to its reflection in stock prices jennings and starks 10 report that the stock price adjustment process upon arrival of new information differs for those firms listed on the chicago board option exchange cboe and they demonstrate that stock price adjustment to new information occurs more rapidly for firms with listed call options the results in both papers appear to warrant consideration of an optiontrading variable in the design of empirical tests both manaster and rendleman 12 and jennings and starks 10 investigate the price relation between shares and call options this paper investigates trading volume copeland 4 posits the use of trading volume as a proxy for the rate of information arrival he concludes that the relation between absolute value of price changes and volume is positive and linear if one accepts a sequentialinformation arrival hypothesis as valid the present research hypothesizes and tests a sequential flow of information between the stock and option markets analyses presented are based on econometric tests for causality1 derived from the works of granger 6 and sims 22 if information trading takes place

market based empirical research in accounting a review interpretation and extension a decade and a half of the most concerted and ambitious research effort in accounting history is evaluated here it is the search into the relationship between publicly disclosed accounting information and the consequences of the use of this information by the major group of usersequity investors as such consequences are reflected in characteristics of common stocks traded in major exchanges this research effort known as market based accounting research mbar obtained its impetus from major developments in finance theory during the late 1950s and early 1960s these were the portfolio selection theory and its offspring the capital asset pricing model capm and the concept of informationally efficient capital markets ecm subsequent developments in information economics agency theory and optimal incentive signaling models were quickly incorporated into mbar while the impetus to this line of research came from other disciplines accounting was not only a beneficiary but also to a modest extent a benefactor mbar is relevant to the study of capital market efficiency the capm information economics and regulation this contribution distinguishes mbar from most accounting areas whose contributions to other disciplines are negligible in

reform in eastern europe a general equilibrium model with distortions in relative prices and factor markets this paper presents an analysis of reforms using a simple general equilibrium model with production the model illustrates some of the distortions remaining in the eastern european countries as they adopt market oriented policies and it shows that price reforms should take priority if simultaneous reform is not possible specifically the authors examine reforms of relative prices of output goods and liberalization of the capital market the model is solved numerically showing that restrictions on capital mobility should be retained until after price distortions have been removed

the political economy of policy credibility the new classical macroeconomics and the remaking of emerging economies the criterion of policy credibility is invoked with increasing frequency today by new classical development economists in debates over economic and institutional reform in developing and transitional countries the paper argues that the credibility criterion is used to privilege neoliberal economic policies and associated institutions the paper demonstrates that the credibility criterion is theoretically anti pluralist and politically anti democratic in this connection the paper argues that a policy s credibility is always secured endogenously through political and economic power rather than exogenously by virtue of the epistemiological status of the theory that promotes it the paper concludes by suggesting two alternative criteria by which policy regimes and the governance structure of monetary institutions could be adjudicated these alternative criteria are termed the principle of democratic credibility and the principle of fallibility copyright 2000 by oxford university press

circumstance and choice the role of initial conditions and policies in transition economies the experience of countries in transition from a planned to a market oriented economy has varied greatly the clearest differences are between the east asian countries china and vietnam and the countries of central and eastern europe cee and the former soviet union fsu china and vietnam have contained inflation and benefited from continued high growth in gdp since the beginning of their reforms while all cee and fsu countries have experienced large declines in output and most have experienced hyperinflation but even in cee and the fsu differences are marked some countries have lost over half of their gdp and growth performance in a number of countries is still poor while others are growing strongly some are still suffering from high inflation while others have successfully reduced annual inflation what determines this divergence of outcomes across transition countries no study so far has analyzed the interaction of all factors including initial conditions political change and reforms in a unified framework including cee the fsu china and vietnam the authors examine these broader interactions but focus first on the role of initial conditions such as initial macroeconomic distortions and differences in economic structure and institutions which have been emphasized less in the literature they find that initial conditions and economic policy jointly determine the large differences in economic performance among the 28 transition economies in the sample initial conditions dominate in explaining inflation but economic liberalization is the most important factor determining differences in growth but reform policy choices are not exogenous they depend in turn on both initial conditions and political reform with political reform the most important determinant of the speed and comprehensiveness of economic liberalization other findings provide additional insight into these relationships results show that liberalization has a negative contemporaneous impact but a stronger positive effect on performance over time the results also show that macroeconomic and structural distortions are negatively related to both policy and performance regarding the former unfavorable initial conditions discourage policy reforms but do not diminish their effectiveness once they are implemented the authors find some evidence that the influence of initial conditions diminishes over time this is in part because many of the initial conditions are themselves modified in the course of transition monetary overhangs are dissipated through inflation industrial overhang is eroded as plants shut down and market memory returns through experience

the effect of the information environment on the relationship between financial disclosure and security price variability abstract this study provides a test of the relationship between changes in a firm s disclosure environment and its security price behavior the initiation of interim reporting is examined theory suggests that the marginal information content of an annual report is greater when it has not been preceded by interim reports and that greater return variability will be observed at the annual report announcement date the variance of returns upon release of the annual report is compared in the annual report only and annual plus quarterly reports environments as predicted by the theory variability is significantly greater in the annual report only environment

reform without losers an interpretation of china s dual track approach to transition this paper develops a simple model to analyze the dual track approach to market liberalization as a mechanism for implementing efficient pareto improving economic reform that is reform achieving efficiency without creating losers the approach based on the continued enforcement of the existing plan while simultaneously liberalizing the market can be understood as a method for making implicit lump sum transfers to compensate potential losers of the reform the model highlights the critical roles of enforcement of the plan for achieving pareto improvement and full liberalization of the market track for achieving efficiency we examine how the dual track approach has worked in product and labor market liberalization in china

dynamics of pro market institutions and firm performance we analyze how pro market institutions affect firm performance in emerging markets integrating transaction costs and signaling theory we advance three arguments first we separate four dynamic components of pro market institutions intensifying and fading pro market reforms and intensifying and fading pro market reversals second we propose an asymmetric dynamic view whereby not only intensifying reforms but also fading reversals improve firm performance while not only fading reforms but also intensifying reversals reduce performance finally we argue that more efficient firms perform better under each of the dynamics we test these arguments on a sample of 1092 firms from 34 emerging markets during 1998 2011

accounting for changing prices the value relevance of historical cost price level and replacement cost accounting in mexico this paper investigates the value relevance of historical cost price level and replacement cost accounting using a sample of mexican firms from 1989 to 1995 it contributes to prior research by distinguishing between two distinct aspects of changing prices 1 the change in the general price level and 2 the change in the value of specific non monetary assets i select mexico to examine because it is unique in requiring and disclosing separately price level and replacement cost adjustments a sample of mexican firms also addresses a key reason cited for mixed results in previous assessments of the usefulness of price level and replacement cost accounting using united states data the effects of inflation are too weak to detect high rates of inflation in mexico ranging between 7 and 52 during the sample period mitigate that potential problem results indicate that replacement cost adjustments are relatively and incrementally relevant beyond historical cost and price level measures while price level adjustments are incrementally value relevant beyond historical measures

democratization and economic liberalization in the postcommunist world how does economic liberalization affect political regime economic liberalization is widely regarded as inimical to democratization the washington consensus which generally endorses shock therapy and envisions a basic compatibility between economic liberalization and democratization is widely disdained in social science many scholars hold that neoliberal economics depresses popular living standards and exacerbates socioeconomic inequalities thereby compromising democratization focusing on the postcommunist region this article tests this hypothesis it examines the data that have been used to assess the relationship between economic liberalization and political democratization and presents analyses using more appropriate and differentiated techniques the authors find that economic liberalization advances rather than undermines democratization using engle granger analysis they find that although economic liberalization has no discernible impact on democratization in the short term democratiza

structural uncertainty and subsidy removal for economies in transition abstract economies in transition are faced with a high degree of structural uncertainty i e uncertainty about which it is possible to learn through experience we study structural uncertainty s effects on a subsidy removal program subsidy removal causes unemployment but yields fiscal benefits and facilitates private sector growth when the policymaker does not know the speed with which the private sector absorbs the unemployed he will be driven toward a more decisive and therefore more informative policy the model also rationalizes policy reversals and implies that irreversibility constraints and political instability dampen the learning effect making policy more gradualist

the economic consequences of reduced uk military expenditure the last few years have seen a variety of proposals for uk disarmament for a re orientation of defence policy towards a less expensive non nuclear stance more commen surate with britain s present economic position in the world unfortunately these proposals become suddenly coy and tentative as they approach the economic implications of their programme in complete contrast to the detailed quantitative calculations they pro vide for other aspects the alternative defence commission 1983 and prins 1983 are typical examples of this the difficulties this lacuna creates are illustrated by the ordeal the labour party faced in the 1983 election campaign they advocated it appears a reduc tion of british defence expenditure which now accounts for just over 5 of gdp to about the european average of around 3 5 but they proved unable to counter the claim of the conservative defence secretary mr heseltine that this policy would cost 400 000 jobs 1 the hesitancy with which proponents of reductions in military expenditure approach the economic consequences is surprising given the near unanimity in the technical litera ture two major studies in the uk eiu 1963 and brown 1964 studies in the us leontief 1965 and a recent survey kennedy 1983 all indicate that disarmament represents an economic opportunity rather than an economic problem nonetheless the tenor of the recent policy literature suggests that it would be useful to provide a detailed assessment of the economic consequences of a reduction in uk military expenditure from 5 to 3 5 of gdp since the results obtained below are broadly in line with those of the studies cited above the contribution of this paper does not lie in the novelty of its conclusion rather it provides a detailed quantitative review of the economic issues cur rently involved in a transition to lower levels of military expenditure since there is a wide literature already available which provides arguments to suggest that such a transition could provide real security benefits the strategic aspects will only be mentioned in passing d smith 1980 and alternative defence commission 1983 provide detail on this

tax reform and the political economy of the tax base abstract this paper studies the political prospects for reform in a model where the tax base and statutory rate are separate instruments of tax policy the model suggests that large changes in the tax code may be easier to enact than marginal reforms the tax base faces a tipping point where even the beneficiaries from tax exemptions support reform at this tipping point tax reform is pareto improving politically feasible tax reform occurs when fiscal needs are large but may nonetheless involve reductions in marginal tax rates there is strategic complementarity in lobbying for tax exemptions resulting in multiple equilibria the model s main predictions are consistent with recent tax reforms in oecd countries

the optimal choice of privatizing state owned enterprises a political economic model we study the choices of two types of maximizing public servants over how far to carry privatization of industries and in what order to privatize two stylizations of the public servant s objectives are considered a niskanen style bureaucrat who maximizes a surplus budget subject to the constraint of staying in office and a populist who maximizes popularity consumer welfare subject to the constraint of a balanced budget other things being equal the bureaucrat will privatize the sector firms with the least market power and the largest subsidy first the populist will adopt the same policy if the marginal costs of products in the private sectors are not too high with respect to the marginal utilities if the marginal costs are too high however the populist will privatize the sector with the largest market power first we also show that privatization is easier and faster in less democratic societies

option pricing of earnings announcement risks this paper uses option prices to learn about the equity price uncertainty surrounding information released on earnings announcement dates to do this we introduce reduced form models and estimators to separate price uncertainty regarding earnings announcements from normal day to day volatility empirically we find strong support for the importance of earnings announcements we find that the anticipated price uncertainty is quantitatively large varies across time and is informative about the future return volatility finally we quantify the impact of earnings announcements on formal option pricing models

pareto improving economic reforms through dual track liberalization abstract pareto improving economic reforms that also simultaneously achieve efficiency can be implemented through a strategy of dual track liberalization its success requires the feasibility of the original plan and its continued enforcement by the state the chinese experience demonstrates that such a strategy works

the creation and resolution of market uncertainty the impact of information releases on implied volatility we model and examine the impact of information releases on market uncertainty as mea sured by the implied standard deviation isd from option markets distinguishing between scheduled and unscheduled announcements we hypothesize that since the timing although not the content of scheduled announcements is known a priori the pre release isd will impound the anticipated impact of important releases on price volatility and that the isd will normally decline post release as this uncertainty is resolved conversely we hypothesize that the unexpected high volatility caused by major unscheduled releases will cause market participants to adjust upward their estimates of likely volatility over the remaining life of the option resulting in an increase in the isd our evidence supports both hypotheses the isds that we consider are from the t bond eurodollar and deutschemark options markets we examine scheduled macroeconomic news releases such as the employment report and the ppi we also find that the observed tendency for the isd to fall on fridays and rise on mondays is due to the weekday pattern of scheduled news releases

option mispricing around nontrading periods we find that option returns are significantly lower over nontrading periods the vast majority of which are weekends our evidence suggests that nontrading returns cannot be explained by risk but rather are the result of widespread and highly persistent option mispricing driven by the incorrect treatment of stock return variance during periods of market closure the size of the effect implies that the broad spectrum of finance research involving option prices should account for nontrading effects our study further suggests how alternative industry practices could improve the efficiency of option markets in a meaningful way

radicalism versus gradualism an analytical survey of the transition strategy debate academic debate on a transition strategy for former socialist economies continues even a quarter century after the collapse of the communism in central and eastern europe and the former soviet union in this paper through an analytical survey of 137 preceding studies we present an overall picture of the debate and examine the relationship between the debate attitudes and the literature attributes in related studies we found that the radicalists maintain a consistent debate attitude from the viewpoints of time speed and policy sequence of economic transition while the debate attitude of the gradualists is more diversified we also found that there is another group of researchers that stays within the framework of the radicalism versus gradualism debate while at the same time keeping at arm s length from both the radicalists and the gradualists in addition our regression estimation of qualitative selection models provides interesting findings on the relationship between the debate attitudes and the literature attributes

associations between alternative accounting profitability measures and security returns the importance of accounting information on security price determination is of interest to both security analysts and accountants beaver 3 downes and dyckman 6 gonedes 12 beaver and manegold 4 and others have investigated the possible relationships between accounting information and market information rosenberg 26 has shown the existence of extra market components of covariance in security returns while simkowitz and logue s l 28 have derived the interdependent structure of security returns however none of this research has explicitly investigated how the empirical results can be affected by alternative accounting profitability measures within an industry simultaneously

regional sub contract suppliers to prime defence contractors evidence of their performance in response to recent changes in demand oakey r p james a and watts t 1998 regional sub contract suppliers to prime defence contractors evidence of their performance in response to recent changes in demand reg studies 32 17 29 there is considerable evidence that technological change occurs unevenly over geographical space and that change is faster in core areas of national economies than at their peripheries the principal result of this paper is a confirmation that south east firms similarly initiate diversification technology strategies more readily than their regional counterparts it is noted that defence spending is a disguised form of regional aid when contracts are awarded in peripheral parts of the united kingdom thus it is concluded that given the laggard behaviour of peripheral firms regarding diversification recent defence spending cut backs in these areas are likely to have a strong negative impact on industrial activity oakey r p james a et watts t 1998 les soutraitants regionaux aux premiers fournisseurs mi

assimilating earnings and split information abstract recent studies have implied that the capital market has become more efficient with respect to the announcements of stock splits and corporate earnings this study calculated residual returns associated with these announcements and then tested by time period early and late years for a between period difference the results suggest that for certain earnings and split announcements the market is no more efficient than it has been in the past

the chinese box the opaque economic borders of the chinese state although the state in china is no longer all encompassing as it had been during the pre 1979 centrally planned period it still reaches into numerous areas of the economy notably through its continuing ownership of state owned enterprises as a result china poses a paradox in that it has incomplete property rights and rule of law which are thought to be essential for growth there are though numerous inefficiencies associated with such a gradual transition which may have maintained a stable growth rate in the past but could hamper future economic development as a key example state owned firms continue to benefit from financial repression in which they received preferable allocations of credit thus china s high savings rate fuels investment which has driven growth but is increasingly inefficient as credit is funnelled to the less productive soes this inefficiency points to the need for legal and institutional reforms which may conflict with the still broad but opaque borders of the chinese state copyright 2011 oxford university press

earnings news and small traders an intraday analysis abstract this study separates trading volume into buyer and seller initiated activities and examines the directional volume reaction in small and large trades to different types of earnings news good bad news triggers brief but intense buying selling in the large trades however a persistent period of unusually high buying activity is observed in the small trades irrespective of the news this anomalous proclivity of small traders to buy is robust across firm size trading volume and different earnings expectation models several explanations are discussed although the behavior does not seem fully explained by existing theories

evidence on the effect of bond covenants and management compensation contracts on the choice of accounting techniques the case of the depreciation switch back abstract provisions of bond indenture agreements and management compensation contracts are examined to derive testable implications concerning management s incentives to choose among alternative accounting techniques the hypotheses are subjected to empirical examination by investigating the voluntary change from accelerated to straight line depreciation for financial reporting purposes only the methodology utilized incorporates an expectations model of accounting earnings in an attempt to separate out of the effects of earnings announcements from accounting change announcements which are often concurrent the evidence from both price and non price data is not consistent with the general hypothesis that bond covenants and management compensation contracts are important determinants of the decision to change depreciation techniques five potential explanations for the results are offered

networking and growth of young technology intensive ventures in china abstract more often than not new ventures lack established products known technologies longstanding customer relations experienced managerial teams sufficient capital and strong reputations almost by definition small new firms lack the resources of many larger established firms the task of an infant firm and a measure of its success is to make a transition from being resource weak to being resource strong how can resources that are critical for profitable growth be acquired for the resource weak new venture researchers have found that entrepreneurs can gain access to valuable resources and they can seek to achieve competitive advantage through networking activities forming and utilizing available relationships with external organizations can allow entrepreneurs to build credibility gain advice financing and customer access build a positive image and obtain resources at below market prices and obtain channel access information and innovations business relationships with other organizations allow an entrepreneur to achieve desired business results through asset parsimony a favorable view toward networking for new ventures leaves a number of unanswered questions however relevant research questions might include who should the entrepreneur seek as a business partner are all inter organizational relationships equal or are some types more valuable to new ventures than other relationships do firms relying on high levels of networking activities actually outperform firms that less actively seek resources through external organizational relationships the present study provides a specific understanding of the concept of networking for entrepreneurs we propose that networking can be understood in terms of range the number of external relationships to obtain resources and of intensity the frequency of contact of and amount of resource obtained from these relationships this research project evaluates the range and intensity of networking among high growth and low growth entrepreneurial ventures extensive interviewing with managers of six young technology oriented firms in the people s republic of china prc affirmed the importance of entrepreneurial networking managers in the three high growth firms reported greater range and intensity of business networking than did managers of three low growth firms matched by industry and age moreover the relationship between networking activities and growth transcended the stage of firm development where networking range and intensity are deemed important in the growth process new venture success may call for entrepreneurs to reach out deliberately to external organizations to capture needed resources to a certain extent such networking activities run counter to important entrepreneurial motivations of independence and autonomy the concept of networking and the results of this study imply that entrepreneurs need to combine the spirit of independence with the reality of resource dependence and they need to balance personal autonomy with strategic business relationships this study also contributes to the understanding of entrepreneurship in our increasingly global economy particularly in the prc business relationships between the united states and the prc have been expanding rapidly in the last decade many foreign businesses seek license agreements joint venture partners equity participation or channel relationships with young ventures in that country do the same rules of networking apply in the prc as the literature suggests apply in the united states new ventures in this study were found to engage in processes of networking activities consistent with those in the west although networking activities may have different cultural roots firm success appeared influenced by the same principles of networking

earnings announcements stock price adjustment and the existence of option markets this paper employs a new approach to study the effects of option trading on the behavior of underlying stock prices extant research compares distributional properties of the stock price at two points in time divided by an event in the option market that might affect price behavior as an alternative we examine the stock price adjustment to the release of quarterly earnings using samples of firms with and without listed options we find the two samples exhibit different adjustment processes with the nonoption firms requiring substantially more time to adjust since the advent of organized stock option trading the investment community

evidence on income measurement properties of asr no 190 and sfas no 33 data a number of studies have tested the association between security returns or levels of market value and current cost accounting data as reported under sec accounting series release no 190 asr 190 and statement of financial accounting standards no 33 sfas 33 for example beaver griffin and landsman 1982 henceforth bgl beaver and landsman 1983 henceforth bl and olsen 1985 found no association while bublitz frecka and mckeown 1985 henceforth bfm and murdoch 1986 found a weak association 1 in this paper we estimate cross section regressions of security returns on historical cost net income and holding gains as was done previously but with several extensions first we define our variables in terms of realizations of returns income and holding gains rather than in terms of unexpected changes thus we

insider trading stock return volatility and the option market s pricing of the information content of insider trading abstract we find strong evidence that net insider selling is positively associated with future stock return volatility consistent with insider selling increasing outside investors uncertainty the positive effect of net insider selling is significantly stronger when the volatility is measured around the earnings announcement apparently option prices do not fully reflect the information content of insider trading for future volatility more specifically we find no evidence that option traders adjust the implied volatility for the insider trading effect in a timely manner consequently net insider selling is significantly associated with future option straddle returns and delta neutral returns

price and trading volume reaction surrounding earnings announcements a closer examination the process of information dissemination and interpretation in securities markets is very complex and mostly unobservable while changes in prices and the amount of trading that takes place at the market level provide evidence of information processing verrecchia 1981 demonstrated that these are not sufficient to describe completely the dissemination of information and its interpretation by investors a descriptive study of price changes and trading volume however may still provide some insights into how investors react to information this paper is an empirical investigation of price changes and trading volume during the days surrounding the announcement of quarterly and annual earnings in the wall street journal wsj in the original paper investigating trading volume and price changes surrounding earnings announcements beaver 1968 was primarily concerned with whether the annual earnings announcement had information content i e led to changes in investors assessments of the probability distribution of future returns if there were any significant price changes and or trading volume during the week of the announcement then the annual earnings announcement was assumed to have had

evidence of the impact of mandatory changes in accounting principles on corporate loan agreements abstract the theory in this paper predicts that mandatory changes in accounting princples can affect the measurement rules defined in restrictive covenants in firms lending agreements consequently those mandatory changes can have an impact on the value of a firm s equity even if the changes appear to be merely cosmetic this contracting cost theory is tested by examining of both event related and cross sectional abnormal performance of the equity of a sample of firms when the accounting princples board changes accounting princples for business combinations the theory provides at best in incomplete explanation of the observed abnormal performance

dual track reforms with and without losers the dual track approach to market liberalization has been widely recognized as the key to the success of the chinese economic reform in this paper we study the effectiveness of this strategy in economic environments where the status quo government control is incomplete we show that in a dynamic context contractual arbitrage will emerge potentially resulting in efficiency losses and or adverse distributional effects by establishing a necessary and sufficient condition for the dual track approach to retain its appeal in a dynamic context our analysis provides a clear guideline to the broader applicability of this reform mechanism

the changing geography of the military industry in britain lovering j 1991 the changing geography of the military industry in britain reg studies 25 279 293 a number of studies have suggested that defence spending has had a significant impact on the location of industry and the geography of labour markets this paper drawing on a recent study of the employment of research and development professionals in the uk defence industry confirms that defence spending and related employment has been concentrated in the south and west of england it also shows that a number of changes are underway the unusually large british defence industry is restructuring as a result of changes in supply and in demand following the end of the cold war major job losses are in process which may amount to a third of a million jobs in the 1990s this is associated with a spatial reorganization the effect of which is generally to consolidate high level activities in the industry in the south of england and deepen the spatial division of labour a key locational influence in this

anticipation of quarterly earnings announcements a test of option market efficiency abstract this study tests chicago board options exchange efficiency by examining option price behavior in the weeks surrounding a firm s quarterly earnings announcement the evidence presented here suggests that a first order autoregressive seasonal process describes quarterly earnings behavior and demonstrates that the information content of an earnings announcement is fully incorporated in option prices by the end of the announcement week

intra industry information transfers associated with earnings releases abstract the impact that a firm s earnings releases have on the stock prices of other firms in its industry is examined for an identifiable sub set of firms the results are consistent with a significant information transfer occurring between the earnings release firm and the other firms in its industry this subset is identified by examining the impact of the release on the stock price of the announcing firm the magnitude of this impact is more significant for a sample of firms which have a larger percentage of their revenues in the same line of business as the earnings release firm vis a vis a sample with a lower percentage of their revenues from the same line of business alternative interpretations of the empirical results are also discussed the research findings have implications for information content and market efficiency research and for research on policy issues associated with disclosure regulation

learning dynamics and support for economic reforms why good news can be bad support for economic reforms has often shown puzzling dynamics many reforms that began successfully lost public support this paper shows that learning dynamics can rationalize this paradox because the process of revealing reform outcomes is an example of sampling without replacement this concept challenges the conventional wisdom that one should begin by revealing reform winners it may also lead to situations in which reforms that enjoy both ex ante and ex post majority support will still not come to completion the framework can be used to explain why gradual reforms worked well in china where successes in special economic zones facilitated further reform whereas this was much less the case for latin american and central and eastern european countries

critical mass effect and restructuring in the transition towards a market economy abstract restructuring firms in a transition economy produces a sort of network externality in that the profitability of restructuring depends on the number of firms that already adopted this strategy we investigate under what conditions a critical mass exists i e a situation in which such externality is positive and restructuring spurs imitation possibly leading to the eventual transformation of the whole economy we find a critical mass effect when the main effect of restructuring is an increase in value added i e aggregate demand rather than an increase in the firm s ability to compete against rival home firms the critical mass case becomes the typical one when competition spurs firms efficiency

spatial divisions of welfare the geography of welfare benefit expenditure and of housing benefit in britain hamnett c spatial divisions of welfare the geography of welfare benefit expenditure and of housing benefit in britain regional studies this paper examines the structure of state welfare expenditure in britain it argues that the geography of state welfare expenditure and its impacts have been relatively neglected given their importance in terms of state expenditure regional distribution and spatial equality it shows that welfare spending is a key component of government expenditure and that it has a distinct regional and local geography the paper shows that there are distinct differences in the geographical incidence of different welfare benefits some of which function to redistribute income from the south to the north of britain and it focuses on the geography of housing benefit as an example of what has been termed spatial divisions of welfare hamnett c les ecarts geographiques de l aide sociale la geographie des prestations sociales et des allocations logement en grande bretagne regional

policy debates government output and expenditure in uk regions and sub regions an analysis of the new experimental accounts data gripaios p and bishop p 2005 government output and expenditure in uk regions and sub regions an analysis of the new experimental accounts data regional studies 39 805 813 this paper examines the regional and sub regional distribution of uk state spending by analysing new data available from recently published regional government accounts the data indicate wide variations in public spending per head across regions with london being a particular beneficiary the results do not indicate any relationship between gross domestic product per head and public spending and they suggest that in total government spending is doing little to ameliorate regional inequality if the state wishes to pursue an active regional policy it hence needs to consider the regional dimension of all state functions not simply those associated with traditional regional policy

trade deficit surprises and the ex ante volatility of foreign exchange rates abstract we investigate the effects of us balance of trade deficit announcements on the ex ante volatility of foreign exchange rates specifically we analyze the association between currency option implied standard deviation isds and the surprise component of monthly merchandise trade deficit disclosures our results indicate that larger surprises regardless of their sign are associated with increased currency isds we also find that deficit disclosures regardless of their content temper market uncertainty on average finally we find that larger than expected deficits tend to depreciate the us dollar jel f31

military expenditure and the restructuring of capitalism the military industry in britain the character of the british defence industry since the 1940s has reflected a regime of accumulation which was shaped by both fordism and the cold war the decline of both these influences means that the political economy of defence spending and the internal organization of the defence industry are changing while the outbreak of peace in europe should lead to some reduction in defence spending on cold war items the world s arms industry is not about to disappear the global arms industry remains huge and is increasing beyond the control of individual national governments the concentration of capital and intensified search for markets is likely to increase the volatility of the industry and affect individual companies and nations with varying results britain may remain disproportionately important in the new military economy copyright 1990 by oxford university press

threats and opportunities faced by private businesses in china abstract this article presents a comprehensive analysis of the environment experienced by private businesses in china through examining their relationships with the major stakeholders namely government supplier employee customer and competitor since the announcement of the economic reform in 1978 substantial political and economic power has been delegated from the central government to the regions endowed with this power local governments have crucial influence on the size of the private sector within their jurisdiction being outside the state allocation plan private firms have less access to raw materials and credit in the volatile political climate of china they are vulnerable to attack during political campaigns maintaining a cordial relationship with local cadres through paying bribes and various charges is thus a prerequisite for survival having solicited political backing a private entrepreneur can not only run his business more smoothly but also may be more tolerated in his illegal activities such as tax evasion profiteering and selling banned products in short the whole situation can be described as a collusion of local governments and private businesses at the expense of the central government s interest under the economic reform the distribution system has become less rigid than before it is easier for private firms to secure supplies whether raw materials or manufactured goods labor input is also not a problem for most private firms which are small in size and employ mainly unskilled workers however large private enterprises have to compete with state collective and foreign enterprises for managerial staff who are in short supply there have been marked changes in the consumption pattern since the early 1980s people spend less on staple foods and more on non staple foods consumer goods and services moreover china is experiencing a consumption boom altogether this offers great opportunities to the private sector which has been expanding its share of industrial output and retail sales very fast on the other hand competition is becoming much keener state enterprises are improving their efficiency and giant multinational corporations are rushing in as there are few entry barriers private entrepreneurs are also competing fiercely among themselves the ideological contradiction of having labor exploitation by private entrepreneurs in a socialist country has prevented the chinese government from actively encouraging private business the private sector has been assigned a supplementary role in the dominant public economy this status has led to discrimination against private firms in obtaining factor inputs accounting partly for their vulnerability to bureaucratic harassment by local cadres this will continue to hamper private business development it is concluded that ideological and political reforms in addition to the economic reform are required for providing a more conducive environment for private businesses the chinese experience of liberalizing the private sector offers useful insights to governments of other developing countries

after state socialism the political origins of transitional recessions transitions from state socialism created a startling range of initial economic outcomes from renewed growth to deep economic crises debates about the causes have largely ignored the political dis

the transition to a market economy pitfalls of partial reform we present a theory of a partial economic reform of a planned economy similar to the one that took place in russia since 1988 and in china earlier in such a reform some markets are liberalized in the sense that producers can sell output to whomever they want including private firms at free prices but at the same time must sell to state firms at state prices we show that such a reform can result in a substantial diversion of subsidized inputs away from state firms and toward private firms even when state firms value these inputs more the result may be a reduction of total output the simple analysis sheds light on many consequences of the soviet reform such as breakdown of coordination of production increased state policing of delivery quotas prohibitions of trading cooperatives and opposition to privatization the model also explains why partial reform failed in russia but worked in china

privatization market liberalization and learning in transition economies privatization and market liberalization are widely considered to be complementary reforms in transition economies this article challenges this view and the closely related big bang approach when pursued too vigorously privatization may impede the transition process following liberalization our result is based on an explicit model of market learning compared to a mature market a market in transition is characterized by greater uncertainty regarding market conditions including equilibrium prices and quanti ties economic actors must learn about these conditions through their participation in the market process less than full privatization is optimal if the costs of learning are sufficiently important

the ex ante and ex post price effects of quarterly earnings announcements reflected in option and stock prices the subject of this study is the effect of investors anticipations of impending informative disclosures on the behavior of option and stock prices our approach introduced in a previous paper patell and wolfson 1979 and substantially extended here represents the following significant departure from traditional information content studies instead of analyzing security price reactions to announcements we analyze preannouncement option prices in order to discern investors beliefs about the range of possible stock price reactions expected to accompany a forthcoming disclosure whose actual content is not yet known in the tests reported here we focus on quarterly earnings announcements as disclosure events whose timing is predictable and we attempt to detect their systematic influence on the relationship between stock and option prices our operational definition of information content emphasizes changes in the variability of common stock returns in response to earnings disclosures while market efficiency precludes investors from predicting the direction of the stock price change which will accompany a future earnings announcement it is likely that investors will anticipate increased price variability at the time of disclosure and indeed several studies have documented announcement date increases in stock price volatility

impacts of economic reform in poland incidence and welfare changes within a consistent framework the costs of shortages and rationing are not captured by standard consumer price indices thus the change in real gdp per capita is an overestimate of welfare losses in transition economics in this study virtual prices are used to calculate new cost of living indices clis the results for polant show that from 1987 to 1992 the cli ignoring the rationing effects is biased upward from 1 53 to 3 71 percentage points per year compared to the estimates of welfare loss that neglect the rationing effects during the prereform period the estimated welfare losses that reflect the rationing are reduced by 50 using hausman virtual prices and by 75 using external proxy virtual prices

policy reform and growth in post soviet russia in pursuit of its transition from a command to a market economy russia has witnessed enormous regional differences in economic growth rates moreover the implementation of economic reforms has also differed markedly across regions we analyze whether regional differences in reform policies can account for regional differences in growth rates and conclude that to a considerable degree they can most notably we find that regional differences in price liberalization policies exhibit a positive direct correspondence with growth we also find that regional differences in large scale privatization exhibit a positive correspondence with the regional formation of new legal enterprises which in turn exhibits a strong positive correspondence with growth

high technology industry in the bristol sub region the aerospace defence nexus boddy m and lovering j 1986 high technology industry in the bristol sub region the aerospace defence nexus reg studies 20 217 231 this paper presents a detailed study of high technology industry in the bristol region which comprises an important element of the uk s m4 corridor growth area high technology industry in the region is found to be primarily identified with the aerospace industry in terms of both products process and occupational structure aerospace is central to high technology industry as a whole in terms of sub contracting and purchasing and through its domination of the labour market the origins of the electronics based aerospace sector are traced in the development of the aircraft and guided weapons industries as they related to the bristol sub region in the post war period this indicates the key role of defence related production and ministry of defence procurement to the genesis and continuing importance of the advanced technology sector in the sub region demonstratin

circumstance and choice this article takes an integrated approach to evaluating the interaction of initial conditions political change reforms and economic performance in a unified framework covering 28 transition economies in east asia central and eastern europe and the fsu initial conditions and economic policy jointly determine the large differences in economic performance among transition economies initial conditions dominate in explaining inflation but economic liberalization is the most important factor determining differences in growth political reform emerges as the most important determinant of the speed and comprehensiveness of economic liberalization raising the important question of what determines political liberalization results suggest the importance of the level of development in determining the decision to expand political freedoms

evolution of market uncertainty around earnings announcements abstract this paper investigates theoretically and empirically the dynamics of the implied volatility or implied standard deviation isd around earnings announcements dates the volatility implied by option prices can be interpreted as the level of volatility expected by the market over the remaining life of the option we propose a theoretical framework for the evolution of the isd that takes into account two well known features of the instantaneous volatility volatility clustering and the leverage effect in this context the isd should decrease after an earnings announcement but the post announcement isd path depends on the content of the earnings announcement good news or bad news an empirical investigation is conducted on the swiss market over the period 1989 1998

standard deviations implied in option prices as predictors of future stock price variability abstract standard deviations implied in option prices have recently been introduced as being better than average predictors of future stock price variability this article specifically studies the predictive ability of implicit standard deviations taking into account the dividend problem and the problem of optimal weighting schemes of the standard deviations when there are several options on the same stock transaction data information was used to study the importance of non simultaneities in observing stock and option prices

the political economy of military expenditure an introduction this paper shows that although the military burden has declined since the korean war in the oecd it still represents an important component of government spending the magnitude of military spending does not provide a measure of its importance to the economy the relation between military spending and accumulation has to be seen as a complex historical dialectical process in which military spending plays a contradictory role the other contributions to the symposium are then discussed within this framework they deal with the empirical analysis of the economic costs of military spending the impact of changing military spending and the problems of conversion copyright 1990 by oxford university press

discretionary policy implementation and reform abstract regulatory agencies treaty negotiators and other delegates often possess considerable authority over the details of policy change i examine how such discretion can block a pareto improving reform when policy change requires the support of both the liberal and conservative factions gridlock reform and reform paradoxes all emerge as cases in a general model with perfect information a reformer with unknown policy preferences can facilitate escape from a gridlock equilibrium

government research establishments state capacity and distribution of industry policy in britain heim c e 1988 government research establishments state capacity and distribution of industrial policy in britain reg studies 22 375 386 location decisions concerning government research establishments are examined to understand why defence and civil establishments were concentrated in the south in the late 1940s when regional policy to disperse economic activity was being actively promoted by the labour government world war two while increasing state capacity generally strengthened individual departments within central government with opposing views on regional policy thus having both positive and negative implications for pursuit of particular policies such as distribution of industry defence departments and the department of scientific and industrial research favouring southern locations generally prevailed over the board of trade the major exception the national mechanical engineering laboratory sent to scotland owed its location to political pressure more difficult to mobilize for oth

foreign exchange option prices as predictors of equilibrium forward exchange rates abstract this study investigates empirically the efficiency of the forward foreign exchange market by using exchange rates implied from currency option prices to signal trading strategies in 30 day forward contracts the proportional deviation between implied and simultaneously observed exchange rates is found to be a direct and statistically significant determinant of subsequent returns on forward contract holdings however an ex ante trading rule test reveals that the additional information impounded in currency option prices is insufficient to generate statistically economic profits

the relative efficiencies of market and planned economies are planned economies systematically more or less productive than market economies this question provoked heated intellectual debate since the time of hayek 11 keynes 16 lange 19 lange and taylor 20 and lerner 22 the collapse of the communist systems of east europe since 1989 closed the debate planned economies were without doubt less efficient in utilizing economic resources than market economies but how much less efficient this question is of obvious scientific interest but it has not been answered some work addressing the broad question of comparative efficiency has been done by bergson 4 5 6 marer 25 26 moroney 28 and others all indicate comparatively lower efficiency in planned economies but none addresses the question by how much our contribution here is to answer this question using a novel methodology we estimate aggregate frontier production functions for two groups of countries 7 centrally planned economies in east europe and 17 predominantly market economies in west europe estimating frontier production functions enables two types of comparisons that have not

disorganization and financial collapse since the fall of communism the former soviet union experienced a strong output decline and a dramatic increase in arrears and barter we develop a model which explains how these three phenomena are connected we introduce liquidity and credit constraints into a model of disorganization and show how these problems can alleviate the hold up problem we argue further that barter creates a hostage that allows to deal with disorganization when credit enforcement becomes prohibitively costly based on a firm survey in ukraine in 1997 we test how input shortages financial shortages and barter affect output growth of firms

government in transition abstract the speed of economic reforms is not the only important determinant of the success of the transition to a market economy the transition of government from a communist state to an institution supporting a market economy is as critical survey evidence shows that russia lags significantly behind poland in the transition of its government which may account for its inferior economic performance despite adopting similar economic reforms i argue that the lack of turnover of old communist politicians and the creation of inappropriate electoral and fiscal incentives for these politicians may account for the poor performance of the russian government and suggest some strategies for improving the situation

how to reform a planned economy lessons from china the countries of eastern europe and the former soviet union have been flooded with advice from the west on how to liberalize their planned econo mies this advice is unfortunately offered in an empirical vacuum no one knows how these econo mies will react to the proposed liberalization meas ures there exists however a neglected source of information china offers a long time series of data over a decade s worth on the effects of reforms on a planned economy china s reforms were gradual but their cumulative effect has been large and they have been remarkably successful china s experiments provide some practical les sons on what kinds of reforms can work elsewhere the dominant school of thought among economists favours the big bang policy of reforming quickly and according to a comprehensive plan partial reforms in this view are useless they will be negated by the remnants of the planning system the proponents of big bang reform have been influential with poland czechoslovakia and rus sia announcing plans for a rapid transition to capi talism

information aggregation in a noisy rational expectations economy abstract this paper analyzes a general equilibrium model of a competitive security market in which traders possess independent pieces of information about the return of a risky asset each trader conditions his estimate of the return both on his own private source of information and price which in equilibrium serves as a noisy aggregator of the total information observed by all traders a closed form characterization of the rational expectations equilibrium is presented a counter example to the existence of fully revealing equilibrium is developed

the law of one price evidence from the transitional economy of china abstract this paper applies the recently developed econometric methods of panel unit root tests and nonlinear mean reversion to investigate price convergence in china the largest transitional economy in the world we find that prices did converge to the law of one price in china for an overwhelming majority of goods and services based on a large panel data set the finding sheds light on the extent of the market economy in china and casts doubt on young s proposition that the economic reform has led to the fragmentation of chinese domestic markets