Understanding macroeconomic fluctuations with unobserved networks. Whilst empirical evidence suggests that firm-level shocks can have large aggregate effects, via network connections, macroeconomic policies have mostly an aggregate nature. This project aims to build a new framework to disentangle aggregate shocks from shocks to individual units. The major innovations are i) to infer the network from the data and ii) to jointly estimate aggregate factors and network effects. Expected outcomes are ....Understanding macroeconomic fluctuations with unobserved networks. Whilst empirical evidence suggests that firm-level shocks can have large aggregate effects, via network connections, macroeconomic policies have mostly an aggregate nature. This project aims to build a new framework to disentangle aggregate shocks from shocks to individual units. The major innovations are i) to infer the network from the data and ii) to jointly estimate aggregate factors and network effects. Expected outcomes are i) measures of systemic risk and ii) a theoretical framework to study the optimality of aggregate versus sectoral stabilization policies. Benefits include a better understanding of macroeconomic fluctuations in Australia and proposed economic policies to mitigate large and persistent declines in employment and GDP.Read moreRead less
Real economy and financial networks. This project aims to analyse the Australian economy from the network perspective. The network approach’s emphasis on the structure of interactions between firms, banks and consumers is important for understanding the economy. The project intends to develop a model of a production network using the input-output links between sectors, including imports and exports, and focusing on credit-lending relations that may cause economic distortions. It also aims to adv ....Real economy and financial networks. This project aims to analyse the Australian economy from the network perspective. The network approach’s emphasis on the structure of interactions between firms, banks and consumers is important for understanding the economy. The project intends to develop a model of a production network using the input-output links between sectors, including imports and exports, and focusing on credit-lending relations that may cause economic distortions. It also aims to advance a theory and estimation methodology for the network formation models useful for prediction and policy analysis. Anticipated benefits include mitigation of economic risks and improved policies.Read moreRead less
Computational methods for solving modern asset pricing models. This project aims to solve a broad range of asset pricing models. Movements in asset prices affect private investors, public sector finances, wealth distribution and business activity levels. Economists have tried to build better models of asset prices, moving away from hyper-rationality and towards realistic features including heterogeneity, habit persistence and bounded rationality. These models’ additional complexity makes them di ....Computational methods for solving modern asset pricing models. This project aims to solve a broad range of asset pricing models. Movements in asset prices affect private investors, public sector finances, wealth distribution and business activity levels. Economists have tried to build better models of asset prices, moving away from hyper-rationality and towards realistic features including heterogeneity, habit persistence and bounded rationality. These models’ additional complexity makes them difficult to solve or to apply to real world problems. The project will use modern hardware and computational tools, insights from economics literature and numerical analysis to provide a set of solution methods for such asset pricing models. This is expected to improve policy analysis and decision making under uncertainty.Read moreRead less
Decentralised assets trading, centralised clearing and systemic risk. This project aims to study the effect of regulating over-the-counter (OTC) financial markets on economic performance. The lack of transparency of OTC financial markets may have exacerbated the severity of the 2007-09 financial crisis. In response, regulators around the world decided to mandate centralised clearing of derivatives traded OTC, believing this would reduce system-wide risk. This project will study the regulatory ch ....Decentralised assets trading, centralised clearing and systemic risk. This project aims to study the effect of regulating over-the-counter (OTC) financial markets on economic performance. The lack of transparency of OTC financial markets may have exacerbated the severity of the 2007-09 financial crisis. In response, regulators around the world decided to mandate centralised clearing of derivatives traded OTC, believing this would reduce system-wide risk. This project will study the regulatory change’s effects on market participation, volumes of trade and prices, and the behavioural effect of shifting risk from market participants to clearinghouses. It expects to suggest remedial policies clearinghouses could implement to control market participants’ risk appetite. These can help enhance future productivity and reduce unemployment in Australia.Read moreRead less