Niclas Andrén and Lars Oxelheim
The financial crisis starting in 2008 made many European countries opt for a change of exchange rate regime. The choice of price measure as an entry requirement to the European…
Abstract
Purpose
The financial crisis starting in 2008 made many European countries opt for a change of exchange rate regime. The choice of price measure as an entry requirement to the European Economic and Monetary Union (EMU) and as input in the monetary policy decision process re‐appeared as an important political and research issue. This paper aims to argue that, considering the importance of producer prices in international competition, their role is underplayed by policy makers and researchers.
Design/methodology/approach
Producer prices are analyzed in the transition from national exchange‐rate regimes to the EMU for 13 two‐digit manufacturing sectors in the first 11 countries to adopt the Euro.
Findings
It was found that significant price convergence before 1993‐1998, but no or modest evidence of convergence after 1998‐2005 when the Euro was introduced. This pattern is partly different from what prior studies have found for consumer prices, and is consistent with the change of exchange rate regime to a monetary union anchoring inflation rates. A conditional β‐convergence analysis reveals effective exchange‐rate changes and differences in cyclicality as important determinants of price convergence, suggesting that import of inflation is an important determinant of price developments in the EMU.
Research limitations/implications
The paper concludes that considering the role of producer prices and their deviating pattern from consumer prices, producer prices are underplayed in the research and deserve more attention. It is argued that increased attention to producer prices is warranted.
Practical implications
Focusing monetary policymaking on consumer prices alone appears inefficient. Rather, then, support for the trade‐off approach in monetary policy‐making is supported.
Social implications
In considering different solutions to the financial crisis, increasing attention should be paid to the development of producer prices.
Originality/value
This is the first study to focus on producer prices in the research on the transition from a national exchange rate regime to a membership of a monetary union.
Details
Keywords
Devi Sulistyo Kalanjati, Damai Nasution, Karin Jonnergård and Soegeng Sutedjo
The purpose of this paper is to investigate the association between audit rotation – at the audit partner and audit firm level – and audit quality. As mentioned in the literature…
Abstract
Purpose
The purpose of this paper is to investigate the association between audit rotation – at the audit partner and audit firm level – and audit quality. As mentioned in the literature, audit rotation has several benefits, and one of them is it can bring a fresh look to audit tasks and subsequently improve audit quality. Moreover, audit itself can help a client to improve its financial reporting. However, ineffective communication between predecessor and successor audit partners or audit firms, and pseudo-rotation can hamper that benefit.
Design/methodology/approach
This study uses multivariate regression analysis to test its hypotheses. Using data from companies listed on the Indonesia Stock Exchange, the sample consists of 688 company-year observations covering the period 2003–2016.
Findings
This study finds that the cumulative number of audit partner rotations is positively associated with audit quality, indicating that rotations at the audit partner level will enhance audit quality. Conversely, it finds that the cumulative number of audit firm rotations is negatively associated with audit quality.
Practical implications
The study’s findings may assist regulators in crafting standards regarding audit rotation. As the findings show, audit partner rotation will improve audit quality, but the audit firm rotation will decrease audit quality. As this study tries to explain the decreasing audit quality from audit firm rotation could be a consequence of ineffective communication or pseudo audit firm rotation. Regulators should try to tackle these problems.
Originality/value
Instead of using tenure as a proxy for a rotation, this study creates a new proxy named the cumulative number of audit partner and audit firm rotations to provide evidence on the benefits of audit rotation.