Understanding the Effects of News Shocks on Macroeconomic Fluctuations. There are significant potential benefits for Australia. First, it could lead to more effective policymaking, with an understanding of how policy in one branch of the government can affect other sectors that have not been considered before. For example, changes in fiscal policy can affect not just growth, but also unemployment, inflation, and the income distribution. Second, this project will make a contribution to the resear ....Understanding the Effects of News Shocks on Macroeconomic Fluctuations. There are significant potential benefits for Australia. First, it could lead to more effective policymaking, with an understanding of how policy in one branch of the government can affect other sectors that have not been considered before. For example, changes in fiscal policy can affect not just growth, but also unemployment, inflation, and the income distribution. Second, this project will make a contribution to the research training of new macroeconomists in Australia: we will train three PhD students in the very latest methods. We also will organize a conference and bring the very top economists in the world to work with researchers here, and to consider issues surrounding the Australian economy. Read moreRead less
Risk Management for Bonds, Currencies and Commodities. Understanding maturity-structure policy is a neglected topic. It needs research before we can determine whether public debt policy should accommodate the emerging needs of self-funded retirees - for long-term debt, new issues of index bonds, and 'survivor' bonds. Planning for annuity-rate risk has lagged far behind the sales of complying pensions. Over 2003 the Australian dollar rose by 34 percent, revealing major deficiencies in the standar ....Risk Management for Bonds, Currencies and Commodities. Understanding maturity-structure policy is a neglected topic. It needs research before we can determine whether public debt policy should accommodate the emerging needs of self-funded retirees - for long-term debt, new issues of index bonds, and 'survivor' bonds. Planning for annuity-rate risk has lagged far behind the sales of complying pensions. Over 2003 the Australian dollar rose by 34 percent, revealing major deficiencies in the standard advice on managing currency risks to retirement incomes. Uninsured disruptions to electricity supply have been an issue (eg in California), and demonstrate a need for innovative financial instruments that cushion and spread the costs.Read moreRead less
An Improved Framework for Analysing the Fiscal Implications of Population Ageing. The Commonwealth Government's 'National Strategy for an Ageing Australia' explicitly acknowledged the potential for intergenerational conflict in Australia as relatively fewer young people must provide for the consumption of a growing proportion of retired people. The Intergenerational Report (IGR) in 2002 was an important step in national planning to avoid such a conflict. The proposed project seeks to address maj ....An Improved Framework for Analysing the Fiscal Implications of Population Ageing. The Commonwealth Government's 'National Strategy for an Ageing Australia' explicitly acknowledged the potential for intergenerational conflict in Australia as relatively fewer young people must provide for the consumption of a growing proportion of retired people. The Intergenerational Report (IGR) in 2002 was an important step in national planning to avoid such a conflict. The proposed project seeks to address major shortcomings in the IGR and provide an improved framework for future IGRs. The project addresses two Priority Goals within the Designated National Research Priority 2. These are: 'Ageing well, ageing productively' and 'strengthening Australia's social and economic fabric'.Read moreRead less
Computing probabilities of theories where these probabilities vary over time with applications in macroeconomics. This project will present a method to produce empirically based policy advice that accounts for the changing economic environment and that allows for a range of assumptions about how the economy works. The research and training will place Australia at the forefront of empirical macroeconomic research and strengthen international research networks. Policy making will be improved as: i ....Computing probabilities of theories where these probabilities vary over time with applications in macroeconomics. This project will present a method to produce empirically based policy advice that accounts for the changing economic environment and that allows for a range of assumptions about how the economy works. The research and training will place Australia at the forefront of empirical macroeconomic research and strengthen international research networks. Policy making will be improved as: it will use information that is more robust to false assumptions; it will quickly incorporate new information; and we will understand better why certain policies did or did not work at different times in the past. The research will impact upon other sciences such as physics and engineering that use the same underlying tools far more than do economists.Read moreRead less
Lifelong Education and Health Investment: Implications for Life Expectancy, Economic Growth and Public Policy. This project will provide Australian policymakers a clear picture of the complex interaction between various policy instruments including subsidies on health and education and income support for retirees and children on the one hand, and socioeconomic outcomes including saving rates, labour participation, productivity, fertility, life expectancy and inequality on the other hand. This kn ....Lifelong Education and Health Investment: Implications for Life Expectancy, Economic Growth and Public Policy. This project will provide Australian policymakers a clear picture of the complex interaction between various policy instruments including subsidies on health and education and income support for retirees and children on the one hand, and socioeconomic outcomes including saving rates, labour participation, productivity, fertility, life expectancy and inequality on the other hand. This knowledge can be used to frame government policies in the areas of health, education, superannuation and pension, and family support. In particular, the project will inform policymakers about the mix of private and public funding of the health system that can produce better health and social outcomes.Read moreRead less
How does the Structure of Government, in Particular the Extent of Fiscal Decentralisation, Affect Long Term Economic Performance in Australia? The research analyses how Australia should best structure its government to maximise long-term economic performance in terms of economic growth and the optimal provision of public goods such as health, education and other public infrastructure. The optimal division of revenue raising and spending responsibilities between the federal government, State gove ....How does the Structure of Government, in Particular the Extent of Fiscal Decentralisation, Affect Long Term Economic Performance in Australia? The research analyses how Australia should best structure its government to maximise long-term economic performance in terms of economic growth and the optimal provision of public goods such as health, education and other public infrastructure. The optimal division of revenue raising and spending responsibilities between the federal government, State governments and other sub-national bodies like city and regional councils will be rigorously assessed from an economic perspective. The research will lead to recommendations regarding improvements in the structure of Australia's government sector, particularly the extent and nature of fiscal decentralisation, capable of improving productivity and future living standards.Read moreRead less
Monetary-fiscal policy interactions and their effect on economic performance: new theory, empirics, and an application to Australia. Both fiscal and monetary policy are powerful tools that affect the wellbeing of individuals. Even if current policies are 'responsible', the social cost of uncertainty about the future is extremely high - to which the 2004 'high interest rates under Labour' election campaign or current heated fiscal debates in the US and EU testify. Our analysis will contribute to ....Monetary-fiscal policy interactions and their effect on economic performance: new theory, empirics, and an application to Australia. Both fiscal and monetary policy are powerful tools that affect the wellbeing of individuals. Even if current policies are 'responsible', the social cost of uncertainty about the future is extremely high - to which the 2004 'high interest rates under Labour' election campaign or current heated fiscal debates in the US and EU testify. Our analysis will contribute to the reduction of the social cost by identifying the institutional setting that is robust to 'bad' policymakers, i.e. one in which socially optimal policies are 'institutionalized' (legislated) rather than resting with individuals. Such arrangements are further likely to stimulate investment and economic growth.Read moreRead less
MONETARY POLICY WITH LIQUIDITY CONSTRAINED GOVERNMENT DEBT MARKETS. Modern monetary policy seeks to influence domestic macroeconomic outcomes, using actions in official Government debt markets. The effectiveness of this route is being challenged by reductions in the level of Government debt outstanding. Monetary policy is faced with the possibility of operating in alternative financial markets. The project will:
* Examine alternative markets for monetary policy operation.
* Examine the effect ....MONETARY POLICY WITH LIQUIDITY CONSTRAINED GOVERNMENT DEBT MARKETS. Modern monetary policy seeks to influence domestic macroeconomic outcomes, using actions in official Government debt markets. The effectiveness of this route is being challenged by reductions in the level of Government debt outstanding. Monetary policy is faced with the possibility of operating in alternative financial markets. The project will:
* Examine alternative markets for monetary policy operation.
* Examine the effects of alternatives on real economy outcomes.
* Develop a model of the economy which controls for global financial conditions - which has not been done before.
* Combine modern econometric techniques.
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Increasing Returns and Economic Efficiency. The project attempts to increase the international profile of Australian research by extending the analysis of the challenging issues of economic efficiency in the presence of increasing returns. The proposed analysis takes account of both allocational efficiency and organizational efficiency. It will integrate the Dixit-Stiglitz model of the traditional analysis with the Yang-Ng-Shi model of the new framework to provide a more realistic analysis that ....Increasing Returns and Economic Efficiency. The project attempts to increase the international profile of Australian research by extending the analysis of the challenging issues of economic efficiency in the presence of increasing returns. The proposed analysis takes account of both allocational efficiency and organizational efficiency. It will integrate the Dixit-Stiglitz model of the traditional analysis with the Yang-Ng-Shi model of the new framework to provide a more realistic analysis that allows for increasing returns in both home and firm/market production. This conceptual extension constitutes an advance that is of analytical value and will also be relevant for the formulation of public economic policy in the Australian setting and also more generally. Read moreRead less
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