Stability of Monetary Unit and Informativeness of Corporate Financial Reporting
Yale ICF Working Paper No. 02-14
22 Pages Posted: 13 May 2002
Date Written: September 2001
Monetary unit is a basic element of accounting used to manage, report, govern and tax organizations in all sectors of the economy. Instability of monetary unit introduces noise, weakening the effectiveness of accounting in performing its important economic roles in society. We model the impact of monetary instability on the accuracy of accounting valuation and consequently on the economics of managing organizations. We also examine some empirically testable implications of the theory. Though the magnitude of this effect remains to be estimated, it may be significant enough to deserve explicit consideration in selection of monetary policy.
Keywords: Stability of Monetary Unit, Corporate Financial Reports, Information
JEL Classification: E31, M41
Suggested Citation: Suggested Citation