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(2008)ThesisThe primary focus of this thesis is on price movements at market levels. This thesis examines the measurement of two aspects of price movements: the degree of price rigidity and pure price change. Price is defined to be rigid if its response to a demand or cost shock is slow and the magnitude of adjustment is proportionately less than the shock. Price rigidity is one of the critical issues in the microfoundations of macroeconomics, and its importance has been documented at least since Keynes' (1936) The General Theory of Employment, Interest and Money. Regarding pure price change, in many markets the measurement of pure price change is difficult to obtain because the observed prices are contaminated by quality and compositional changes in the products. The literature on price indexes emphasises the importance of accounting for quality change at the market level. These issues will be explored in this thesis. The chapters of this thesis provide distinct but complementary contributions to the literature of price movement. Chapter 2 uses vector error correction models to estimate the degree of price rigidity in the retail coffee markets of 17 different countries. A stylised fact that emerges from the work is that price adjustment typically occurs within two quarters after a shock is imposed. In terms of the magnitude of price changes, prices are found to be more rigid to cost shocks than to foreign shocks. Chapter 3 explores the extent to which products follow systematic pricing patterns over their life cycle and the impact this has on the measurement of inflation. A number of specifications of hedonic models have been applied to data on supermarket and electronic products. Strong evidence of systematic life cycle effects has been found. Chapter 4 develops an hedonic regression model to construct multilateral indexes-indexes that are consistent across time and space-in housing markets. The set-up of the hedonic model attains some desirable properties, both in terms of statistical and index number perspectives. Applied to house prices in Sydney, the model generated some interesting results, including that the cheaper regions exhibit greater price dynamics than the more expensive regions. Some potential areas for further research are also considered.
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(2007)ThesisThe commissariat was the main economic drivers in the colonial economy between 1788 and 1835. It is not frequently discussed in the literature and it was Professor N. G. Butlin who challenged economic historians to write the story of the commissariat in operation. This thesis relates the story of the role and operations of the commissariat in colonial NSW. The commissariat filled many roles, ranging from government store, to financial services provider and a quasi-treasury. It was the main purchaser of local production from local settlers, and offered a novel and creative 'barter system' by exchanging store receipts for goods and services received from local settlers
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(2007)Journal ArticleBased on unit record data from four household surveys conducted by Statistics New Zealand for the years 1983/1984, 1991/1992, 1995/1996 and 1997/1998, this paper addresses some ethnic dimensions of income inequality among New Zealanders over the period of the surveys. It applies alternative techniques of decomposition of the Gini coefficient of inequality by subgroups of population. It then analyses how changes in the incomes of specific population subgroups affect the overall inequality. The results help quantify the economic distances among the different ethnic populations of New Zealand, and indicate how and why these distances have been changing over time.
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(2007)ThesisThe French and Dutch refusal to ratify the European Constitution in 2005 and the collapse of many East German businesses post-reunification; are just some examples of the hurdles integrating nations face. Integration of nations affects many economic factors such as public good allocation, trade, production, labour, consumption and even macro-economic policy instruments. Therefore, it is important to understand what motivates integration. Few scholars have broached the subject of the integration of nations (see Goyal and Staal (2004)), where size asymmetry and historical dependence are considered. Starting with Alesina and Spolaore (2003)'s Size of Nations symmetric framework, we attempt to do this with a two nation (asymmetric in size) location model. The key findings are that size differentials and the constitutional design (the identity of the decision maker) matters. In this thesis, we consider the social planner (government) and voters. The social planner maximizes social welfare for his own nation. Voting outcomes become non-trivial as it depends on the number of alternatives and the voting system. We categorize integration into two main forms. Full Integration is when the two nations fully integrate to form a new one, only one capital remains. Federated Integration is where the nations integrate but retain some form of sovereignty; this is represented by the retention of both capitals. Size difference matters when two nations chose to integrate. As the size difference between the two nations increase it becomes harder for integration to occur; nations would integrate if there is no size difference. The identity of the decision maker will affect the threshold on size.
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(2008)ThesisChapter 2: Welfare comparisons between funded and pay-as-you-go (PAYG) or unfunded pension systems are often made using the Aaron condition (Aaron, 1966). However, the Aaron condition as usually stated is not precise enough about the exact form of the PAYG pension system. PAYG pension systems can be either of the defined benefit or defined contribution variety. They can also differ with regard to intra-generational redistribution, for example pension benefits can be flat or earnings related. Here, four alternative PAYG pension systems are considered. It is shown that each system generates its own Aaron condition. In addition, the standard Aaron condition assumes that the wage rate and labour participation rate does not vary across individuals. These assumptions are also relaxed. Using US data covering the period 1933-2001, it is shown that the results of welfare comparisons are highly sensitive to different specifications of PAYG systems. Chapter 3: The sustainability of a defined benefit pay-as-you-go (DBPAYG) pension system is investigated in the context of an overlapping-generations model of endogenous fertility. The model places particular emphasis on the time costs of child rearing. It illustrates the mechanism by which such a pension system can increase the opportunity cost of having children and hence sow the seeds of its own destruction. The model is then extended to allow for fertility-based payments. Such a system is more likely to be sustainable. These models highlight a number of issues that are of considerable relevance to a number of OECD countries that have generous DBPAYG pension systems and falling fertility rates. Chapter 4: The previous chapter focused on transition dynamics, while this chapter investigates steady state outcomes of fertility based defined benefit pay-as-you-go (DB-PAYG) pension systems in the context of an overlapping-generations model with endogenous fertility and heterogeneous agents. Special attention is paid to the impact on fertility, utility, taxation, and per capita saving. Chapter 5: A two-stage bargaining model is developed to describe how fertility decisions are made in a strategic family setting. Given the assumption that family contracts are incomplete and cannot be used to enforce optimal behaviour, it is shown that investments in children (i.e. the fertility rate) may be sub-optimal. This is because the woman may find it in her interest to invest too little in children in stage 1 of the model in order to protect her bargaining status in stage 2. The chapter then considers in the context of this model the impact on fertility rates of changes in child custody rules (in the case of divorce), the wage rate, and the male-female wage differential. It concludes by exploring how the introduction of child subsidies can change the results.
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(2007)ThesisIn this thesis we consider two comparative statics questions of changes in risk. The first question concerns situations where an individual faces some risk and has no control over the uncertain environment. In these situations we ask what kind of changes in risk will cause the individual's expected utility to increase. The second comparative statics question concerns situations where an individual faces some risk and has some control over the uncertain environment. In particular, we consider situations where the individual maximizes her expected utility with respect to some control parameter. Here we ask what kind of changes in risk will cause the individual's optimal value of the control parameter to increase. The existing literature has answered these questions for a class of individuals (for example, the class of risk averse individuals). This thesis differs from existing literature as it focuses on a given individual, and thus reveals some of the person-specific factors that affect individual?s responses to changes in risk. The aim of the thesis is to show how an order on distributions, termed single crossing likelihood ratio (SCLR) order, can intuitively answer both questions for a given individual. The main contributions of the thesis are as follows. First, the thesis presents the SCLR order and its main properties. Second, the thesis shows that the SCLR order can answer the above comparative statics questions in an intuitive way. In particular, the thesis shows that the answer to the above questions, with the use of the SCLR order, depends on a risk reference point which can be interpreted as a "certainty equivalent" point. Thus it is demonstrated that individual's responses to changes in risk are affected by her "certainty equivalent" point. Lastly, the results of the thesis can be used to provide an intuitive explanation of related existing results that were obtained for a class of individuals.
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(2008)ThesisWriters on the business cycle often emphasize that non-linear models are needed to account for certain of its features. Thus it is often said that either the asymmetry of the duration of business cycle expansions and contractions or the variability of these quantities demand a non-linear model. Such comments are rarely made precise however and mostly consist of references to such assertions from the past. Thus the asymmetry in the cycle is mostly accompanied by references to Keynes (1936) and Burns and Mitchell (1946). But these authors were looking at what we call today the classical cycle i.e. movements in the level of GDP, and so the fact that there are long expansions and short contractions can arise simply due to the presence of long-run growth in the economy, and it is not obvious that it has much to do with non-linearity. This thesis aims to introduce various statistics that can be used to characterise the specific shape of the non-linearity observed in macroeconomic time series. Chapter 2 introduces a range of statistics and presents the dating algorithm used in this thesis, which is based on the BBQ algorithm of Harding and Pagan (2002). Chapter 3 tests the adequacy of linear models versus the SETAR model of van Dijk and Franses(2003) and the bounceback model of Kim, Morley and Piger (2005) in capturing observed non-linear features of the data. Chapter 4 extends this work by examining the three state Markov model of Hamilton (1989), again using the “bounce-back” model of Kim C., Morley, J. and J. Piger, (2005), and the more complicated “tension” model of DeJong, D., Dharmarajan, H., Liesenfeld, R. and Richard, J., (2005). Chapter 4 also extends Chapter 3 by estimating the above mentioned models on US GDP, Australian non-farm GDP, US investment and Australian dwellings investment. They are then simulated in order to gauge the cycle properties. Chapter 5 analyses the business cycle implications of two related multivariate dynamic factor models presented in papers by Kim and Piger (2001, 2002). Finally Chapter 6 concludes.
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(2008)ThesisThis thesis applies innovative methods to the efficiency and productivity analysis of the Australian banking system. Key areas of investigation include the impact of regulatory reforms on bank performance, the impact of firm entry and exit on industry productivity and the changing nature of banking and the role of risk in measuring bank value-added. The latter leads to the construction of a new bank production model, emphasising risk management as part of a bank’s value-added. As such, the proposed bank output framework views risk as a productive service, rather than a bad output or externality, which is often assumed in the literature. Aided with this new framework, several refinements are suggested for the treatment and measurement of bank output by researchers and statistical agencies. A unified regulatory framework combined with a greater level of harmonisation in rules in the Australian banking sector, has meant that a pooled analysis of all deposit-taking institutions has become feasible for the first time. With an enlarged dataset new insights are gained into the relative performance of deposit-taking institutions in Australia. The results challenge commonly held views of bank efficiency and the relevance of scale, size and incumbency when measuring bank efficiency. The new definition of bank output is also applied across the sector using econometric and non-parametric techniques to gauge productivity. Problems with balanced data sets and aggregation of firm level productivity are examined. A new approach to decomposing aggregate industry level productivity is introduced based on strong axiomatic grounds and its ability to attribute productivity between continuing, exiting and entering firms. The technique is applied for the first time and uses the newly developed bank output production model. The analysis provides key information on the relative performance of firms in the Australian banking sector.
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(2008)ThesisThis dissertation contains a series of essays that provide empirical evidence for Australia on some fundamental predictions of real business cycle models and on the convergence and persistence of real interest rates. Chapter 1 provides a brief introduction to the issues examined in each chapter and provides an overview of the methodologies that are used. Tests of various basic predictions of standard real business cycle models for Australia are presented in Chapters 2, 3 and 4. Chapter 2 considers the question of great ratios for Australia. These are ratios of macroeconomic variables that are predicted by standard models to be stationary in the steady state. Using time series econometric techniques (unit root tests and cointegration tests) Australia great ratios are examined. In Chapter 3 a more restrictive implication of real business cycle models than the existence of great ratios is considered. Following the methodology proposed by Canova, Finn and Pagan (1994) the equilibrium decision rules for some standard real business cycle are tested on Australian data. The final essay on this topic is presented in Chapter 4. In this chapter a large-country, small-country is used to try and understand the reason for the sharp rise in Australia’s share of world output that began around 1990. Chapter 5 discusses real interest rate linkages in the Pacific Basin region. Vector autoregressive models and bootstrap methods are adopted to study financial linkages between East Asian markets, Japan and US. Given the apparent non-stationarity of real interest rates a related issue is examined in Chapter 6, viz. the persistence of international real interest rates and estimation of their half-life. Half-life is selected as a means of measuring persistence of real rates. Bootstrap methods are employed to overcome small sample issues in the estimation and a non-standard statistical inference methodology (Highest Density Regions) is adopted. Chapter 7 reapplies the High Density Regions methodology and bootstrap half-life estimation to the data used in Chapters 2 and 5. This provides a robustness check on the results of standard unit root tests that were applied to the data in those chapters. Main findings of the thesis are as follows. The long run implications of real business cycle models are largely rejected by the Australia data. This finding holds for both the existence of great ratios and when the explicit decision rules are employed. When the small open economy features of the Australian economy are incorporated in a two country RBC model, a country-specific productivity boom seems to provide a possible explanation for the rise in Australia’s share of world output. The essays that examine real interest rates suggest the following results. Following the East Asian financial crisis in 1997-98 there appears to have been a decline in the importance of Japan in influencing developments in the Pacific Basin region. In addition there is evidence that following the crisis Korea’s financial market became less insular and more integrated with the US. Finally results obtained from the half-life estimators suggest that despite the usual findings from unit root tests, real interest rates may in fact exhibit mean-reversion.
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(2008)ThesisThis study investigates general equilibrium effects of an alternative social security policy in Indonesia. The study aims to analyse some financial issues of the proposed policy using a dynamic CGE model. The focus is investigating possible tax scenarios to finance the proposed policy and their impacts on the economy. The simulation results suggest that the consumption tax base should be used as the main financing method. This is because based on various simulations the selected consumption taxes have less negative impacts on the economy than the selected income taxes. Those selected consumption taxes more equitably distribute tax burden and improve income inequality in the long run. However, the increasing price because of this policy selection should also be considered seriously. The simulations also include the study of the demographic transition in Indonesia. A view that is common in the literature is that the rapid increase of labor force in the next three decades could raise the proportion of skilled workers in the labor force and enhance the economic growth. Instead the simulations suggest contrary results. When we repeat the tax/transfer simulations with the demographic transition, real GDP per capita and consumption per capita fall further below the baseline projections. Further simulations are conducted to investigate possible policy actions to mitigate the effects of this demographic transition. This study also covers possible allocation decision trade-offs surrounding the proposed social security policy. That is, the trade-offs between universal social pension insurance and universal social health insurance, and between universal tax-financed social security programs and other important development programs. Given the limitation of our study, that all stakeholders have agreed to develop a universal tax-financed social security program, we conclude that universal tax-financed social health insurance should be given more priority than universal tax-financed social pension insurance. The study concludes with some remarks regarding important areas for future research.