Time-consistent macroeconomic policy in nonlinear models. Efforts to use fiscal policy for macro-stabilisation have led to elevated debt levels and possible default in many countries. This project examines the appropriate design of fiscal policy and its implications for debt over the business cycle.
Optimal policy in the global liquidity trap. The recent global financial crisis has led most central banks in developed economies to reduce their policy interest rates to unprecedentedly low levels. As a result, the liquidity trap has now become a serious concern internationally. This project will derive the optimal monetary and fiscal policy in the global liquidity trap. It will also show how a shock in one country affects other countries and propose tools for improving the empirical fit of the ....Optimal policy in the global liquidity trap. The recent global financial crisis has led most central banks in developed economies to reduce their policy interest rates to unprecedentedly low levels. As a result, the liquidity trap has now become a serious concern internationally. This project will derive the optimal monetary and fiscal policy in the global liquidity trap. It will also show how a shock in one country affects other countries and propose tools for improving the empirical fit of the models in a liquidity trap. This project will become the foundation for the discussion of policy options in the global liquidity trap.Read moreRead less
Sins of the Fathers - The Role of Reputation in Capital Market Integration and the Choice of Exchange Rate Regime. This project investigates, theoretically and empirically, how past and present reputation for monetary policy credibility influences a country's choice of exchange rate regime and its ability to borrow internationally in domestic currency. The inability of emerging market countries to borrow in domestic currency is an important source of global financial instability, and the study c ....Sins of the Fathers - The Role of Reputation in Capital Market Integration and the Choice of Exchange Rate Regime. This project investigates, theoretically and empirically, how past and present reputation for monetary policy credibility influences a country's choice of exchange rate regime and its ability to borrow internationally in domestic currency. The inability of emerging market countries to borrow in domestic currency is an important source of global financial instability, and the study contributes to an understanding of how policymakers can better facilitate the process of international financial integration. By introducing new advances in the theory of reputation into models of exchange rate crises and examining lessons from Australian financial history, the research brings a fresh perspective to existing analyses of financial crises.Read moreRead less
Securitised Real Estate and Private Dwellings: International and Domestic Linkages and Implications for the Macroeconomy. Cycles in the housing market and its interaction with other economic and financial market variables may have enormous effects on the Australian economy. Despite this there is little research on the interactions between housing and the macroeconomy. This project examines these issues. The implications of the research extend to three broad areas. The first is monetary policy by ....Securitised Real Estate and Private Dwellings: International and Domestic Linkages and Implications for the Macroeconomy. Cycles in the housing market and its interaction with other economic and financial market variables may have enormous effects on the Australian economy. Despite this there is little research on the interactions between housing and the macroeconomy. This project examines these issues. The implications of the research extend to three broad areas. The first is monetary policy by understanding housing prices, inflation and interest rates linkages. Second, constructing formal models including housing may provide a means of testing the implications of policies such as the first home owner grant or reductions in housing specific taxes. Finally, financial markets may benefit by understanding of the role of property in a diversified portfolio.Read moreRead less
Commodity cycles. The implications of resource demand by emerging markets are issues policy makers need to understand. This project address these by focusing on currency, equity and commodity linkages, the financial market and macroeconomic effects of currency collapse, and the role of emerging markets in mitigating/amplifying economic shock transmission.
IMPROVING THE THEORETICAL COHERENCE OF DATA-DRIVEN VAR MODELS. The project seeks to improve the tradeoff between theoretical and empirical coherence that is often present in empirical macroeconomic models. Using existing Australian models the project examines appropriate means of imposing theoretical restrictions on empirically coherent Vector Autoregression (VAR) models. Building on work by the authors, an improved VAR model of the Australian economy will be developed. This model will be used t ....IMPROVING THE THEORETICAL COHERENCE OF DATA-DRIVEN VAR MODELS. The project seeks to improve the tradeoff between theoretical and empirical coherence that is often present in empirical macroeconomic models. Using existing Australian models the project examines appropriate means of imposing theoretical restrictions on empirically coherent Vector Autoregression (VAR) models. Building on work by the authors, an improved VAR model of the Australian economy will be developed. This model will be used to assess particularly the impact of asset prices on inflation and economic performance over the past two decades. Further attention will be paid to assessing the role of monetary policy in the Australian economy.Read moreRead less
Estimating the impact of fiscal stimulus on household expenditure. This project aims to measure the impact on household expenditure of unexpected government bonus payments. Precise measures of this parameter can help improve fiscal policy in Australia and overseas, whilst giving researchers a more precise understanding of how households react to unexpected increases in disposable income. This research will also make a methodological contribution, since we will be using a research methodology not ....Estimating the impact of fiscal stimulus on household expenditure. This project aims to measure the impact on household expenditure of unexpected government bonus payments. Precise measures of this parameter can help improve fiscal policy in Australia and overseas, whilst giving researchers a more precise understanding of how households react to unexpected increases in disposable income. This research will also make a methodological contribution, since we will be using a research methodology not previously implemented in Australia, which is to exploit the random timing of payments across households, combined with a unique household-level panel dataset on weekly expenditure. The project will compare results using this approach with results from other strategies, such as surveys and time series analysis.Read moreRead less
Estimating the impact of fiscal stimulus on household expenditure. The tax bonus payments of the $42 billion Nation Building and Jobs Plan were among the largest fiscal policy packages in the developed world. This project applies a new methodology to estimate the short-term impact of this cash handout on consumer spending, allowing better modelling of the Australian economy.
Economy-wide consequences of regulation and privatisation policy regimes. The spread of regulation across the majority of the economy necessitates that regulatory policy and approaches account for affects on GDP, employment, innovation and the growth rate. This project will offer policy institutions, including the ACCC, the Productivity Commission and the Treasury, an analysis of these effects and develop new computer models suited to future use to explore economy-wide implications. This need ....Economy-wide consequences of regulation and privatisation policy regimes. The spread of regulation across the majority of the economy necessitates that regulatory policy and approaches account for affects on GDP, employment, innovation and the growth rate. This project will offer policy institutions, including the ACCC, the Productivity Commission and the Treasury, an analysis of these effects and develop new computer models suited to future use to explore economy-wide implications. This need arises even in sectoral regulatory agencies, however, most particularly where service industries, such as telecommunications, are dominated by one or a few firms whose performance has major effects on the costs and innovativeness of firms in other sectors.Read moreRead less
Economic growth and globalisation: identifying costs and benefits. Globalisation provides opportunities to stimulate economic development and growth, but it may also impose costs on national economies. This project will utilise economic theory and econometric analysis to identify the principal sources and the magnitude of such benefits and costs. It will focus on three areas: trade in consumer goods; trade in capital goods; and the importation of knowledge and technology. The results will in ....Economic growth and globalisation: identifying costs and benefits. Globalisation provides opportunities to stimulate economic development and growth, but it may also impose costs on national economies. This project will utilise economic theory and econometric analysis to identify the principal sources and the magnitude of such benefits and costs. It will focus on three areas: trade in consumer goods; trade in capital goods; and the importation of knowledge and technology. The results will inform national policy-making in the areas of trade policy, industry policy, education and R&D.Read moreRead less