New approaches for testing in nonlinear models. The outcome of this project is a new econometric methodology that will be particularly useful for developing our understanding of Australian (and global) financial markets. Specific benefits are that (i) our value-at-risk models will enhance national and international awareness of issues relating to financial risk management; (ii) our exchange rate pass through model will aid the development of Australian trade and pricing policies and (iii) our du ....New approaches for testing in nonlinear models. The outcome of this project is a new econometric methodology that will be particularly useful for developing our understanding of Australian (and global) financial markets. Specific benefits are that (i) our value-at-risk models will enhance national and international awareness of issues relating to financial risk management; (ii) our exchange rate pass through model will aid the development of Australian trade and pricing policies and (iii) our duration models for trade in Australian stocks will lead to a better understanding of the microstructure of the Australian stock market.Read moreRead less
The US Interest Rate Conundrum and its Implications for Australia. The project generalises existing factor models of interest rates. The project will result in several benefits nationally as well as internationally. As U.S. interest rates and U.S. monetary policy in general are important determinants of interest rates in Australia, the project will lead to an improved understanding of the international mechanism linking interest rates. This will also provide a better framework in which to unders ....The US Interest Rate Conundrum and its Implications for Australia. The project generalises existing factor models of interest rates. The project will result in several benefits nationally as well as internationally. As U.S. interest rates and U.S. monetary policy in general are important determinants of interest rates in Australia, the project will lead to an improved understanding of the international mechanism linking interest rates. This will also provide a better framework in which to understand and monitor monetary policy in Australia. An important aspect of the project is the development of new testing procedures that improve upon existing nonparametric methods.Read moreRead less
Helping Central Banks Measure Unobserved Variables Using Real-time Forecasts. The project addresses structural measurement problems confronted routinely by central bankers. The techniques developed, and the estimates provided, will aid directly the Partner Organisations (the Reserve Bank of Australia, the Reserve Bank of New Zealand and Norges Bank) and other central banks in formulating monetary policy. The analysis will allow interest rates in Australia and elsewhere to be set with greater pre ....Helping Central Banks Measure Unobserved Variables Using Real-time Forecasts. The project addresses structural measurement problems confronted routinely by central bankers. The techniques developed, and the estimates provided, will aid directly the Partner Organisations (the Reserve Bank of Australia, the Reserve Bank of New Zealand and Norges Bank) and other central banks in formulating monetary policy. The analysis will allow interest rates in Australia and elsewhere to be set with greater precision. The techniques developed in this project will facilitate the understanding and communication of monetary policy within the central banks concerned, and enhance communication of monetary policy strategy to the public.Read moreRead less
Australian Real Time Data: Construction, Analysis and Implications for Real Time Policy Making. This first comprehensive macroeconomic real time database for Australia recording the actual data available to policy makers at the time of making decisions will serve as a standard reference for accurate ex post macroeconomic policy evaluation and for accurate forecasts and decision making which are robust to data revisions. The free database will be of interest to Australian researchers, economists, ....Australian Real Time Data: Construction, Analysis and Implications for Real Time Policy Making. This first comprehensive macroeconomic real time database for Australia recording the actual data available to policy makers at the time of making decisions will serve as a standard reference for accurate ex post macroeconomic policy evaluation and for accurate forecasts and decision making which are robust to data revisions. The free database will be of interest to Australian researchers, economists, forecasters and policy makers. Readily applicable and interpretable forecasts of the business cycle and the current state of the Australian (and US) economy (e.g. likelihood of recessions or inflation) will be of direct relevance to Australian policy-makers in Government, the Reserve Bank of Australia, and to the Australian decision-makers. Read moreRead less
Modelling the Transmission of International Monetary Policy Shocks: Implications for Australian Asset Markets. Three main outcomes of the project are as follows. First, the relative strengths of the transmission mechanisms linking monetary policy and asset markets will be better identified. This will lead to a better understanding of monetary policy thereby enabling the Reserve Bank to achieve its policy goals of inflation operating at or near the target rate, and for currency markets to exhibit ....Modelling the Transmission of International Monetary Policy Shocks: Implications for Australian Asset Markets. Three main outcomes of the project are as follows. First, the relative strengths of the transmission mechanisms linking monetary policy and asset markets will be better identified. This will lead to a better understanding of monetary policy thereby enabling the Reserve Bank to achieve its policy goals of inflation operating at or near the target rate, and for currency markets to exhibit stability. Second, a number of empirical puzzles relating to monetary policy and asset markets in general, that exist in the empirical literature, will be solved. Third, the project will lead to a number of international papers which will add to the international reputation of Australia as a leading research nation.Read moreRead less
International linkages between financial and real economy cycles. This project will develop empirical multivariate models of business cycles for different countries, and will study how they are linked via international financial markets. The significance of the project is that the models will integrate previous work done on financial-real economy links in single country settings, and it will explicitly study the effects of disequilibrium in international financial markets (such as overvaluation ....International linkages between financial and real economy cycles. This project will develop empirical multivariate models of business cycles for different countries, and will study how they are linked via international financial markets. The significance of the project is that the models will integrate previous work done on financial-real economy links in single country settings, and it will explicitly study the effects of disequilibrium in international financial markets (such as overvaluation of foreign currency) on individual economies. The project will determine the appropriate domestic monetary policy response to such shocks, and the potential for forecasting both the advent of such shocks and their impact on individual economies.Read moreRead less
Growth and Inflation Dynamics: Measuring Steady-State Growth, Output Gaps and Inflationary Pressures using Survey Data in Australia and Other Advanced Economies. The aim of the project is to develop, for Australia and other advanced economies, new measures of 'potential production'. Such measures are important in the prediction of periods of recession and inflation, and in the formulation of macroeconomic policy. The proposal seeks to address the shortcomings of existing measures by (i) incorpor ....Growth and Inflation Dynamics: Measuring Steady-State Growth, Output Gaps and Inflationary Pressures using Survey Data in Australia and Other Advanced Economies. The aim of the project is to develop, for Australia and other advanced economies, new measures of 'potential production'. Such measures are important in the prediction of periods of recession and inflation, and in the formulation of macroeconomic policy. The proposal seeks to address the shortcomings of existing measures by (i) incorporating direct measures of expectations of future output and inflation from survey data, and (ii) being consistent with standard economic analysis. Forming best practice methods in the use of survey data in policy formation and in the production of economic forecasts will be a vital contribution of the project.Read moreRead less
Nonlinear Econometric Modelling: A Complex Systems Perspective. It is becoming increasingly accepted that economic systems are both complex and adaptive. However, this introduces a range of problems in constructing, estimating and testing economic models using time series data. In this project, this problem will be addressed through the formulation and implementation of a new methodology and associated techniques. These techniques will allow a researcher to use information obtained from a set o ....Nonlinear Econometric Modelling: A Complex Systems Perspective. It is becoming increasingly accepted that economic systems are both complex and adaptive. However, this introduces a range of problems in constructing, estimating and testing economic models using time series data. In this project, this problem will be addressed through the formulation and implementation of a new methodology and associated techniques. These techniques will allow a researcher to use information obtained from a set of nonlinearity tests to determine which type of nonlinear model provides the best representation of a data generating mechanism. Selected high frequency financial and macroeconomic data (for the US and Australia) will be used in the study. This research is intended to change the direction and emphasis of econometric modelling and promises to have a fundamental impact on forecasting and policy evaluation methods.
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Estimating and evaluating the predictive accuracy of structural macroeconomic models. This project will provide improved methods to inform Australia's macroeconomic policies and its strategies for economic development by suggesting the most adequate structural macroeconomic model for the Australian economy. Effective macroeconomic policies, in turn, assure stable economic development, smoothes effects of economic cycles and balances inflation, unemployment, the exchange rate and other macroecono ....Estimating and evaluating the predictive accuracy of structural macroeconomic models. This project will provide improved methods to inform Australia's macroeconomic policies and its strategies for economic development by suggesting the most adequate structural macroeconomic model for the Australian economy. Effective macroeconomic policies, in turn, assure stable economic development, smoothes effects of economic cycles and balances inflation, unemployment, the exchange rate and other macroeconomic indicators. All these indicators are closely linked to the welfare of the Australian people and prosperity of the Australian economy. The importance of an accurate macroeconomic analysis is increased in the current condition of inflationary pressures, fiscal challenges, climate change, and world market instabilities.Read moreRead less
Inventories and the Business Cycle in Australia and the U.S. The project looks at the contribution that inventories make to business cycles in Australia and the U.S. It uses recent research by the chief investigator on measuring business cycles in order to explain how the presence of inventories in an economic system might influence activity in that system. It then adapts an existing model in the literature to quantify the role of inventories in the Australian and U.S business cycles.. It seeks ....Inventories and the Business Cycle in Australia and the U.S. The project looks at the contribution that inventories make to business cycles in Australia and the U.S. It uses recent research by the chief investigator on measuring business cycles in order to explain how the presence of inventories in an economic system might influence activity in that system. It then adapts an existing model in the literature to quantify the role of inventories in the Australian and U.S business cycles.. It seeks to answer a number of questions that have arisen in recent years over whether the business cycle is becoming longer owing to improved methods of inventory controlRead moreRead less