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
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
A Principled Approach to Computer Simulation of Dynamic General Equilibrium Macroeconomic Models. In the last two decades a new generation of computer-intensive
modeling techniques has risen to prominence in macroeconomics. These
methods have broad policy applications, from public finance and
reserve bank operation to analysis of long-run productivity growth,
taxation reform, unemployment, international trade policy and natural
resource conservation. The size and complexity of these model ....A Principled Approach to Computer Simulation of Dynamic General Equilibrium Macroeconomic Models. In the last two decades a new generation of computer-intensive
modeling techniques has risen to prominence in macroeconomics. These
methods have broad policy applications, from public finance and
reserve bank operation to analysis of long-run productivity growth,
taxation reform, unemployment, international trade policy and natural
resource conservation. The size and complexity of these models means
that even computer-based techniques will rely for the foreseeable
future on efficient program design to solve them. The project will
construct a comprehensive set of solution techniques and software for
this class of macroeconomic models, including detailed mathematical
analysis on accuracy of model output.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
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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Empirical and Theoretical Coherence of Macroeconometric Models. Variants of the G-Cubed models are used by researchers, governments and international institutions for policy analysis. The need for policy makers to have models with substantial structural detail and a strong theoretical base is paramount for transparency and accountability. The development of simple SVAR models which capture these theoretical underpinnings will provide Australian policy makers with an effective tool for economic a ....Empirical and Theoretical Coherence of Macroeconometric Models. Variants of the G-Cubed models are used by researchers, governments and international institutions for policy analysis. The need for policy makers to have models with substantial structural detail and a strong theoretical base is paramount for transparency and accountability. The development of simple SVAR models which capture these theoretical underpinnings will provide Australian policy makers with an effective tool for economic analysis. It will also provide powerful tools that enable forecasting and detailed policy analysis within the same broad conceptual framework. The emphasis is on international and financial market linkages which encompass key issues facing the Australian economy.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
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
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