bluuebunny/crossref_metadata_2025 huggingface dataset:
A Short‐Run Econometric Model of the Japanese Wool Textile Industry*
Authors: CARLAND D. J. , PAGAN A. R.
Published: October 2007

Few models of the Japanese wool textile industry have been constructed, despite the importance of the Japanese as the largest purchasers of Australian wool on a single‐country basis. This paper constructs a twenty‐five equation, monthly model explaining the flow of material through the various processing stages of the industry from greasy wool imports to fabric production. The model was estimated over the period 1968 to 1976 and its performance in dynamic simulations over the same period was good until 1975 when a cartel was implemented. Forecasts outside the sample period for 1977 were satisfactory. The model demònstrates the role of stocks within the industry and concludes that there exists a lengthy lag in the response of wool purchases to changes in Japan's economic activity.
Interest Rate Flexibility and the Open Economy*
Authors: KIERNAN E.
Published: October 2007

The objective of the paper is to analyze the importance of institutional changes in the financial system for the efficacy of monetary policy and in particular for the connection between the balance of payments (capital account) and monetary policy. Particular institutional developments studied include the emergence of certificates of deposit and the removal of interest rate ceilings in 1973. The result established, using a general equilibrium model, is that the degree to which transactions in the capital account of the balance of payments offset a domestic monetary expansion is greater in a regime of market‐determined interest rates than in a regime of administered rates.
Aspects of Monetary Theory and Policy*
Authors: PORTER MICHAEL G.
Published: October 2007

Contributions to monetary theory are reviewed, with emphasis on issues facing small open economies such as Australia. We consider the increased emphasis on information in commode it yes change, and the information content of different stabilization policies. ‘Ration’ expectations. Wealth effects, discretionary monetary policy and the alleged ‘death of Keynes’ are discussed in this context.

The section on open economies discusses alternative models of exchange rate determination and monetary aspects of international transmission processes. The ‘problem’ of overshooting exchange rates is analyzed.

The paper also reviews the debate on financial regulation and issues facing the Inquiry into the Australian Financial System.
On a Neo‐Classical Analysis of the Keynesian Income Distribution Theory
Authors: LAING N. F.
Published: October 2007

The Keynesian element of Kaldor's distribution theory was that ‘investment is determined independetly of current savings’. It is argued here that this propsition is true of neo‐classical economic analysis which takes any account of expectations. The Kaldorian mechanism. therefore, also operates in this class of models. This is illustrated by showing the effect in a neo‐classical model of an improvement in investment opportunities in redistributing income from low to high savers. It is argued inter alia (a) that there is no question of a need to reconcile neo‐classical and neo‐Keynesian income distribution theories(b) that the neo‐classical analysis put forward is essentially ex post and therefore serves to isolate mechanism and make relative predictions.
An Analysis of Australian Exports to its Major Trading Partn's:Mid‐1960s to Late 1970s*
Authors: McCOLL G. D. , NICOL J. R.
Published: October 2007

‘Constant market shares’ analysis is used to examine Australia's exports to its major trading partners. Declining shares of overall UK. EEC and US markets were partly offset by increasing shares of Japanese imports. Australian exports of alumina, iron ore, coal, other metalliferrous ores and some non‐ferrous metals and semi manufactures gained larger shares of imports, but Australia lost ground in other commodities. Un favourable commodity composition effects were responsible for these losses. There were some offsetting gains arising from favourable market distribution effects. predominately because of Japanese purchases of Australian goods Losses' due to lack of ‘competitiveness’ in agricultural commodities were important in the 1970s, particularly for exports to the UK.
A Tax‐Wage Bargain in Australia:Is a Free Lunch Possible?*
Authors: CORDEN W. M. , DIXON P. B.
Published: October 2007

This paper examines the feasibility of a tax‐wage bargain in Australia designed to increase employment without generating excess product demand while government expenditure. investment and the balance of trade are held constant. It is assumed that tax cuts would lower pre‐tax real wages while keeping post‐tax real wages constant, and that the lower wage costs would increase potential output and employment along neoclassical lines. The question is whether product demand would expand more or less than potential supply. Estimates from the ORANI model of the IMPACT project are used to obtain a relationship between real wage costs and potential output.
Externality Models and Health:a Rückblick over the last Twenty Years*
Authors: CULYER A. J. , SIMPSON HEATHER
Published: October 2007

Economists interested in the political economy of health have attempted to provide a theoretical justification for intervention in the market for health services. Traditional externality analysis, at most, provides a case for variable price subsidies, and the implications of such models do not correspond with the features of existing health care systems. This paper suggests that if the externality is viewed as arising directly from health status, the problem for health policy becomes essentially an engineering one requiring careful analysis of the technical relationships between health services and status. Variable price subsidies are not an obvious implication since individual marginal values of health care become largely irrelevant. Contract costs may be minimized if the ‘firm’ is very large and this may provide the beginning of an explanation for direct State involvement in the production and distribution of health care.
The Relationship Between Unemployment and Unfilled Vacancies in Australia:1952–1978*
Authors: HARPER IAN R.
Published: October 2007

This paper attempts to specify, estimate and test the stability of the Australian U‐V curve for the period 1952–78. After rejecting several simple functional forms of the relationship, a dynamic specification based on the separate works of E. S. Phelps and B. Hansen is adopted. This is found to fit the Australian data satisfactorily. Tests for the structural stability of the relationship over the period reveal the presence of two structural shifts. one during 1962 and the other during 1973. Preliminary investigation of possible causes of this instability points to increases in the read level of unemployment benefits and reductions in the assisted migrant intake over the period as significant contributing factors.
Stability Properties in a Dynamic Stackelberg Oligopoly Model*
Authors: RICKARD JOHN A.
Published: October 2007

The paper considers the oligopoly problem which arises when sellers adopt the ‘Stackelberg strategy’. Using this strategy, each seller maximizes his profit function on the assumption that each of his rivals adopts the usual Cournot assumption. The effects of an incomplete adjustment process and variable marginal cost are considered. A necessary and sufficient condition for the stability of the solution w obtained. For constant marginal cost the solution is only stable for three or fewer sellers. In general, increasing marginal cost has a stabilizing effect on the solution but the stability is suprisingly independent of the speed of adjustment.
High Teenage Unemployment:The Role of Atypical Labour Supply Behaviour*
Authors: GREGORY R. G. , DUNCAN R. C.
Published: October 2007

The very high levels of teenage unemployment experienced in Australia since 1974 have largely been thought to be he to the diyerential impact of employment demand on the youth labour market. In this paper we show that during the recession teenage employment has been favoured relative to the employment trend of the past and that the large increases in teenage unemployment have largely arisen from the marked change in the labour force participation rate. The paper goes on to examine factors which seem to have been important in generating the changed supply response —changes in school participation rates, the increased importance of part‐time work, increases in unemployment benefits, the permissible income levels for unemployment benefit recipients, changes in wage levels and the important interactions between these various factors.
Money Demand, Consumer Demand and Relative Prices in Australia*
Authors: CLEMENTS KENNETH W. , NGUYEN PHUONG
Published: October 2007

This paper develops a system‐wide model in which the consumer simultaneously allocates his income to money holdings and consumption. The model is estimated with annual Australian data and the results indicate that relative prices have a significant influence on money holdings. The results are used to decompose the rate of inflation into its. various components, the main ones being money supbly, real income and relative prices.
A Dynamic Model of Cyclical Labour Force Participation*
Authors: BOWDEN ROGER J.
Published: October 2007

Time series studies of labour force participation tend to be rather ad hoc regressions of participation rates on unemployment. The author builds an explicit model of flows into and out of the labour force in which flows are forced by important cyclical variables such as vacancies and duration of unemployment as well as the unemployment rate. The resulting nonlinear model is fitted for Australian data. Among the conclusions of interest is that discouragement eflects are not constant but vary according to the stage of the business cycle. Over moderate ranges of unemployment, discouragement is less than that found by other authors.
Profits, Variability of Profits and the Prices Justification Tribunal*
Authors: CHAPMAN D. R. , JUNOR C. W.
Published: October 2007

In 1973 the Prices Justification Tribunal was established and given certain powers over the price‐setting practices of large firms in Australia. This paper addresses itself to the impact of that body on firms' markup. Using a large sample of Australian firms observed from 1969 to 1978, this paper establishes evidence that although a statistically significant downward effect on firms' markup can be attributed to the tribunal, in numerical terms the effect has been very small.
The Cyclical Effects of Incremental Export Subsidies*
Authors: KLEIMAN EPHRAIM , PINCUS JONATHAN J.
Published: October 2007

The Crawford Committee on structural adjustment in Australia recommended a subsidy to be paid on the excess of manufacturing export revenues over the average of some number of previous years. Schemes, of this nature have been used in New Zealand. Pakistan, Singapore and elsewhere, and may produce a regular cycle in exports and in domestic prices and quantities. A subsidy‐induced cycle is unlikely to be avoided in most Australian manufacturing export industries, except under conditions of rapid inflation or productivity ‐growth. The cyclical pattern can be avoided, at some cost to the Treasury, by setting the subsidy base at some fraction of actual past performance.
Monetary Rules:A Preliminary Analysis*
Authors: JONSON P. D. , TREVOR R. G.
Published: October 2007

This paper examines the effects of three simple rules for monetary policy in an econometric model of the Australian economy. Its main contribution is to examine such rules under a range of exogenous shocks to the economy. rather than over a particular historical episode. A second contribution is to show that, in the model used, the money supply may be controlled by variations in interest rates under official control. However. lags of two to four quarters are involved for the shocks considered in the paper.

The results are consistent, in the short run, with those obtained by Poole—that is, it is sensible to fix the money supply when the shocks are ‘real’ and to fix the interest rate when the shocks are ‘financial’. In the medium to long run. however, it is shown that the variability of inflation and unemployment may be less when money is controlled even for a financial shock. These conclusions are strengthened if allowance is made for the ‘underwriting’ problem.
Who Pays for Home Consumption Pricing Schemes?*
Authors: PARMENTER B. R. , SAMS D. , VINCENT D. P.
Published: October 2007

In the 1930s Giblin conjectured that in an important sense the costs of home consumption pricing schemes for agricultural export Commodities are borne by other lightly‐sheltered industries in the trading sector. including other agricultural industries. The effect of the increase in the domestic price of the supported commodity on the domestic‐cost structure. especially via wage indexation. is the mechanism by which this cost is imposed. This paper uses the ORANI model of the Australian economy to provide an empirical analysis of Giblin's conjecture for the case of a hypothetical home‐price scheme for wheat
On the Long‐Run Growth Effects of a Minimum Wage for a Two‐Sector Economy*
Authors: SGRO PASQUALE M. , TAKAYAMA AKIRA
Published: October 2007

This paper investigates the effect of (nationally enforced) minimum wage regulation on economic growth using the standard two‐sector model. The paper shows, inter alia. that the minimum wage regulation (if it is effective) always lowers the rate of growth by inducing over‐capitalization in the economy, and that a minimum wage poor which is sufficiently high causes the economy to decay continually. A diagrammatical exposition of some of the results is also provided.
Evaluation of Welfare Change in Quantity‐Constrained Regimes*
Authors: CORNES RICHARD , ALBON ROBERT
Published: October 2007

There are many circumstances where individuals are subject to constraints other than income and prices. Evaluation of welfare change from a price‐taking position to a quantity‐constrained position presents special problems. While remaining firmly in the partial‐equilibrium tradition, indifference curves in the price‐quantity space are applied to the identification of an equivalent variation. a modified Marshallian measure and a compensating variation in quantity‐constrained situations. These measures satisfy the condition of CV < MS < EV for a normal good. A Marshallian measure that has been used—the ‘simple Marshallian measure’—is shown to have a considerable drawback.
Bentham or Nash? On the Acceptable Form of Social Welfare Functions*
Authors: NG YEW‐KWANG
Published: October 2007

The acceptability of the Nash Social Welfare Function is questioned because a minute (perhaps hardy perceivable) welfare change of someone with a very low welfare level might overwhelm enormous welfare changes of others. The axiomatic derivation of the Nash SWF by Kaneko and Nakamura is analyzed. Arguments for and against social welfare as separable in, linear in, and an unweighted sum of individual welfares are critically discussed. Separability follows from the individualistic ethics (Fleming, Sugden and Weale). Linearity follows from the ‘logic’ of rational choice in the face of risk (Harsanyi). (Diamond's counter‐example is rejected.) Unweighted sum follows from either (i) informational restriction precluding interpersonal comparison of welfare levels (D'Aspremont and Gevers, Maskin); or (ii) with finite sensibility, equation of just‐perceivable increments of welfare across persons (Edgeworth) or the Weak Majority Preference Criterion (Ng).
Specialization and Dynamics in a Trade Model*
Authors: MANNING R.
Published: October 2007

An economy which can produce two tradeable goods, and an investment good which augments capital stocks, is shown to specialize in an optimal stationary state unless it is in the interior of a continuum from which no change is ever needed. On the traverse to a stationary state, non‐specialization occurs if at all for only a finite time. Although the instantaneous production frontier is concave, the long‐run frontier is linear, but the long‐run rate of product transformation differs from the supply price ratio with positive time‐preference. Long‐run specialization may differ from that predicted by long‐run comparative advantage.
The ‘New Federalism’ and Horizontal Equalization*
Authors: GROENEWOLD NICOLAAS
Published: October 2007

Under Stage I of Australia's ‘New Federalism’ policy a given share of Commonwealth tax revenue is to be distributed to the States. This paper examines the States (Personal Income Tax Sharing) Act 1976 and proposes a concrete fiscal equalization criterion consistent with the provisions for equalization in the Act. Distribution models proposed in Mathews (1979) and Commonwealth Grants Commission (1981) are examined and shown not to satisfy this criterion. An alternative is presented.
Women at Work in Melbourne and Adelaide Since 1871
Authors: SINCLAIR W. A.
Published: October 2007

This article presents estimates of female participation rates in the workforce from 1871 to 1971 in two Australian cities. Short‐term changes in participation between 1881 and 191I are analyzed. It is concluded that changing conditions of supply were an important determinant of changes in the participation rate during that time and suggested that supplementation of family income by unmarried daughters provides the key to this relationship. Finally an attempt is made to reconcile short‐term instability of the participation rate with longer term stability up to 1947 in terms of a widening in the range of employment opportunities for women at about the time of World War I.
Australian Public and Private Capital Formation, 1901–75*
Authors: BARNARD A. , BUTLIN N. G.
Published: October 2007

We present new estimates of Australian public capital formation as a reasonably consistent time series for 1901 to 1975 and comment on some issues they raise. The series is disaggregated by level of government and by function and separates public enterprises from other junctions. Primarily because we recognize internal funding of capital formation by public enterprises the new estimates differ quite radically from existing estimates. After 1930 the government share of total capital formation declined from a traditional average of one half to less than 40 per cent. Associated with this relative restraint since the early 1950s were an increasingly ‘business‐like’ management of public enterprise and a growing pressure on the private sector to provide additional infra‐structure.
The Inequality of Household Incomes in Australia*
Authors: MURRAY DAVID
Published: October 2007

This paper presents income inequality statistics for Australia calculated from the published results of the two official income surveys of 1968‐69 and 1973‐74. These results suggest firstly that the level of household income inequality in Australia has been previously understated. Secondly, it is noted that there was little, if any, change in inequality over the period. However, when families are classified by number of income earners an unambiguous decline in inequality within these groups occurs. These observations are related to other changes in the economy.
An Investigation of the Specification and Stability of the Australian Aggregate Wage Equation*
Authors: KIRBY MICHAEL G.
Published: October 2007

Previous researchers of the Australian aggregate wage equation have chosen to use overlapping quarterly rates of change instead of the simple quarterly rates of change in heir empirical specification of this relationship. This paper argues that there is little intuitive or empirical evidence to support a continuation of this preference. The use of simple quarterly rates of change yields a well‐specified and stable empirical relationship, thus offering a viable alternative to the traditional approach. The estimation results provide further evidence or some of the Australian Phillips curve controversies.
Inflation and Stock Market Returns:Some Australian Evidence*
Authors: SAUNDERS ANTHONY , TRESS RICHARD B.
Published: October 2007

This paper analyzes the relationship between Australian stock returns and inflation over the period 1965‐79. The effects of inflation in a ‘rational investor’ valuation framework are discussed. Empirical tests suggest that nominal stock returns and inflation are related in a significantly negative fashion, implying that stocks have been extremely poor inflationary hedges for the investor over the period. In addition, Granger‐Sims tests of causality indicate a mainly unidirectional relationship between inflation and stock returns, with price level charges leading the equity index in time.
Price Bands and Buffer Funds
Authors: QUIGGIN JOHN C. , ANDERSON JOCK R.
Published: October 2007

Price‐band stabilization schemes are widely used although they have generally been regarded as second‐best options. In this paper, it is shown that a class of control problems with plausible social welfare functions yields price‐band stabilization as the optimal solution. Thus the proponents of price‐band schemes need not be regarded as satisficers.
Sex Discrimination in the Reward for Skills and Experience in the Australian Labour Force*
Authors: HAIG B. D.
Published: October 2007

Human capital equations are estimated for males and females in Australia, which express earnings as the product of endowments and the return on these endowments. The results are used to examine the effect of discrimination on the difference in the average earnings. The effect of occupational segregation on the earnings of women is also examined.
Exchange Rate Policy and the Resources Boom*
Authors: CORDEN W. M.
Published: October 2007

This paper considers some policy choices posed by the prospective Australian resources boom, distinguishing between the investment boom and the export boom and between the adjustment and the non‐adjustment options. With adjustment both booms are likely to lead to real appreciation, raising the ‘Dutch disease’ issues. Non‐adjustment means accumulating foreign exchange reserves by preventing both nominal appreciation and inflation. It is discussed whether protection by tariffs or quotas should be lowered or raised because of the export boom. An Appendix analyzes the monetary policy implications of both the floating rate (adjustment) and the fixed rate (non‐adjustment) cases.
Wage Determination in Japanese Manufacturing: A Review of Recent Literature*
Authors: TAN HONG W.
Published: October 2007

This paper surveys the Japanese literature on wage determination, highlighting the debate between institutional and human capital explanations of inter‐firm wage differentials. Both approaches predict (and find) that years of tenure in the current firm are more highly rewarded than outside experience, but do not explain adequately the systematic differences in this valuation of experience across industry, firm size and occupation. An alternative hypothesis linking technical change to skills and wage differentials is reviewed and shown to be supported empirically.
Transport Cost and Tariff Protection of Australian Manufacturing*
Authors: CONLON R. M.
Published: October 2007

This paper provides estimates of transport cost and tariff protection available to import‐competing Australian manufacturing industries. It finds that transport costs provide an important component of total protection available to such industries; one which, for many, is more important than the Australian tariff. In view of the effects of protection on industrial structure and performance, it should be explicitly recognized that transport costs are an unavoidable element of the protective structure and are deserving of study in their own right.
The Contribution of Employment Separation to Teenage Unemployment*
Authors: FOSTER W. F. , GREGORY R. G.
Published: October 2007

In this paper we analyze the relationship between labour market flows and the unemployment rate of teenagers compared to males aged 25–54 years. For 1979–80 teenagers separated from employment at approximately five times the rate of adult males and this was the principal factor associated with their high rate of unemployment. Job‐finding success from unemployment and from outside the labour force is approximately the same for each labour market group. A special feature is the analysis of gross flows between full‐time and part‐time employment. Labour market flows involving part‐time employment account for little of the unemployment rate difference.
Market Theoretical Frameworks—Which One?*
Authors: MOLDOFSKY NAOMI
Published: October 2007

The problem of choice between theoretical frameworks forms the focal point of this paper. Its intention is to discuss a possible choice between two distinct approaches to the market order—the ‘neoclassical’ and the ‘Austrian’. Firstly, the basis upon which the two theoretical frameworks are distinguished is explained. Secondly, an attempt is made to show that the two are indeed different and to derive the implications of their differences for policy, for the practice of economics as a social science and for human well‐being. Finally, a defensible criterion is suggested along with the ensuing choice, and an explanation is offered as to the relevance of such a choice.
A Note on the Existence of a Competitive Optimal Output*
Authors: QUIGGIN JOHN
Published: October 2007

The question of the existence of a competitive optimum under conditions of price and technological uncertainty is examined. Necessary and sufficient conditions covering all but a ‘borderline’ indeterminate case are derived.
Exploration Versus Extraction Costs as Determinants of Optimal Mineral‐Rights Leases*
Authors: HYDE ROBERT , MARKUSEN JAMES R.
Published: October 2007

Leasing agreements concerning the exploitation of mineral deposits on government lands are analyzed with a special emphasis on the distinction between exploration and extraction activities. Results include a demonstration that the conditions for the optimal sharing of exploration costs are closely related to the conditions for the optimal pricing of public goods. Other results include a demonstration of how the sharing of exploration costs relative to the sharing of production costs is affected by asymmetries in information as well as by differences in risk aversion.
State‐Federal Resource Tax Rivalry: The Queensland Railway and the Federal Export Tax*
Authors: CASSING J. H. , HILLMAN A. L.
Published: October 2007

This paper presents a stylized account and analysis of the implications of the intergovernmental tax rivalry which arises between the Queensland and Federal governments in their efforts to tax resource rents. In particular, coal is taxed explicitly through the Federal export levy and implicitly through the Queensland railways ‘excess rail freight’. A game‐theoretic environment thus arises. It is shown that if each government sets its tax rate optimally in reaction to the other government's tax polity, then less revenue is generated at a higher deadweight cost. The optimal cooperative solution is compared to the non‐cooperative equilibrium and the resulting welfare gains are identified.
Economics and the Arts: A Review of Seven Years*
Authors: THROSBY C. D.
Published: October 2007

Contributions to the literature on the economics of the arts are reviewed covering the period 1975 to date. It is argued that although the work surveyed is uneven in quality and incomplete in its coverage, it has made sufficient impact to establish the economics of the arts as a significant area in the development of economic theory and analysis. The paper assesses the importance and relevance of work carried out in four broad areas of study: the role of government in arts markets; the operations of funding agencies; the production of arts goods and services; and consumer behaviour and demand for private consumption in the arts.
A Comparison of Four Macroeconometric Models of the Australian Economy*
Authors: McKIBBIN W. J.
Published: October 2007

For more than a decade, macroeconometric models have been used in Australia as tools in policy analysis and as aids in the task of forecasting major economic variables. Until recently, however, not much work had been done in comparing these models. Challen and Hagger (1979a, 1979b) provide a useful introduction to existing Australian models which includes a summary of simulation studies previously undertaken with these models. In the current paper, the economic content of four of these models is summarized in a simple theoretical framework. Simulation analysis is also used to examine the dynamic adjustment mechanisms associated with the theoretical structure of each model.

A general conclusion of this paper is that more work is needed on model evaluation in Australia, based on a wider range of criteria than have been used in the past.
A Note on Retrospectivity and the Tax System*
Authors: NELLOR DAVID C. L.
Published: October 2007

The legitimacy or otherwise of retrospective tax legislation has become a topical issue in Australian tax reform debates. This note considers the economic costs of permitting this budgetary practice. While under certain circumstances the standard welfare cost of the tax system may be reduced by retrospective announcement of tax arrangements, the costs of forming expectations. required by the possibility of retrospective tax legislation lead to a reduction in the value of economic activity.
The Regional Demand for Petrol in Australia*
Authors: DONNELLY W. A.
Published: October 2007

The regional demand for petrol in Australia is estimated using quarterly data on a State basis for the period from the September quarter 1958 through the June quarter 1981. A dynamic demand model is postulated and estimates obtained using an iterative Zellner procedure. The results suggest that per capita petrol demand is not income elastic as reported in other studies, and support the hypothesis that demand is price inelastic. In addition, the States exhibit statistically significant differential responses to price and income shocks. This implies that the specification of a single national demand function may be misleading.
Price Expectations and the Australian Price Level: 1901–30*
Authors: POPE DAVID
Published: October 2007

This paper examines the sources of change in Australian prices in the first three decades of this century. It probes the information content of simple ‘money is dominant’ models of inflation and of the expectations‐augmented Phillips curve and shows that price expectations played a dramatically different role then than in the 1970s.
Inflation and Profits — The SVA and Depreciation Adjustments in the National Accounts*
Authors: HAIG BRYAN
Published: October 2007

This paper argues that the figures of profits contained in the national accounts are inappropriate in assessing the performance of industry. The error lies in deducting amounts for stock valuation adjustment from recorded profits.

There is a discussion of the arguments usually proposed by national accountants for the deduction and it is concluded that these arguments are invalid. A suggestion is made that the amount of the stock valuation adjustment should be regarded as reflecting the delay in passing on costs of production, and this should be recorded in the national accounts as a timing difference between estimates of national expenditure (which exclude the stock valuation adjustment) and national product (where profits include the stock valuation adjustment).
A Geometric Analysis of Exchange Rate Adjustment Under Static and Rational Expectations*
Authors: FANE GEORGE
Published: October 2007

This note presents a simple geometric apparatus for analyzing macroeconomic questions relating to small open economies.

The particular problem analyzed here for illustrative purposes is the adjustment of a floating exchange rate regime, under both static and rational expectations, to a step increase in the money supply. We consider both an unanticipated immediate increase and an unanticipated announcement of a forthcoming increase. We derive the general criterion which determines whether the exchange rate initially overshoots or undershoots the change required for long‐run equilibrium.
A Tax Evasion Model with Allowance for Retroactive Penalties*
Authors: RICKARD J. A. , RUSSELL A. M. , HOWROYD T. D.
Published: October 2007

Discrete models of tax evasion are considered when evasion has occurred over a period of several years. Allowance is made for growth in income, investment of illicit gains from successful evasion, and the imposition of retroactive penalties. Retroactive penalties increase deterrence of evasion if introduced at a point where evasion has been continuing for some years, since the utility gain from continuing successful evasion is unaffected, whereas the utility loss will be increased regardless of attitude to risk. Prohibitive penalty rates are determined, and a range of penalty rates are given in which some dishonest taxpayers may become honest. The formulation of the basic model and consequent conclusions are relevant to the current Australian taxation scene.
Money and Growth: Some Old Theorems from a New Perspective*
Authors: CARMICHAEL JEFFREY
Published: October 2007

This paper reconsiders the effect of the rate of monetary expansion on the real growth path of the economy. The analysis uses an overlapping‐generations model with production and intergenerational bequests. The first objective is to define the set of necessary conditions under which money will be superneutral. These conditions are shown to be very restrictive. The second objective is to show that, if money is not superneutral, Tobin's original intuition on the subject, namely that a rise in the rate of monetary expansion raises the capital intensity, can be derived from an optimizing model under certain conditions.
The Role of Fiscal Policy in the Eighties*
Authors: NEVILE J. W.
Published: October 2007

After surveying objections to using expansionary fiscal policy to raise output and employment. this article concludes that budget deficits do not necessarily lead to high interest rates and that crowding out is only moderate. even with non‐accommodating monetary policy. The major constraint on the effectiveness of expansionary fiscal policy is the need to avoid devaluation. If real wages are rigid downwards. devaluation will lead to increases in inflationary pressure rather than increases in output. Because of this. and because of inflationary pressure from short‐run Phillips curve effects. expansionary fiscal policy must be complemented by a prices and incomes policy.
The Effects of a Booming Export Industry on the Rest of the Economy*
Authors: LONG NGO VAN
Published: October 2007

It is argued that the roles of relative factor intensity and of the degree of factor mobility have been neglected in models of booming export industries. This paper shows that, contrary to popular beliefs. the mineral export boom may result in (a) an expansion of all industries, (b) an increase in the profitability of the traditional tradeables sector, and(c) a fall in the relative price of non‐tradeables.
Progressivity Index of Sales Tax on Individual Expenditure Items in Australia*
Authors: KAKWANI NANAK
Published: October 2007

The main contribution of this paper is to provide the estimates of the degree of progressivity (or regressivity) of the sales or excise tax on more than 300 individual consumption items. This is the first tax incidence study which considers such a fine classification of goods and services. The estimates based on the Australian Household Expenditure Survey 1975–7 6 provide a guideline for determining the tax rates on individual consumption items. Several interesting findings which emerge from the numerical results given in the paper suggest the usefulness of considering such a fine classification of goods and services.
The Le Châtelier Principle and the Demand for Imports in the Short Run and the Medium Run: Australia, 1959–60–1978–79*
Authors: KOHLI ULRICH R.
Published: October 2007

This paper examines the role of prices and factor endowments in the determination of Australian imports. We consider two factors, labour and capital. The supply of capital is assumed fixed, labour is assumed fixed in the short run. and variable in the medium run, Direct as well as indirect estimates of short‐run and medium‐run import price and quantity elasticities are derived. Allowance is made for technological change, and various separability hypotheses are tested. As predicted by the Le Châtelier Principle. the own price elasticity of imports is larger in the medium run than in the short run.
Is US Monetary Growth a Leading Indicator of Australian Monetary Growth?
Authors: LAYTON ALLAN P.
Published: October 2007

For an open economy the existence of internationally integrated goods and capital markets implies the country's monetary growth may be considerably influenced by fluctuations in international monetary circumstances. Theoretical literature exists which suggests US monetary growth may be catalytic in determining world monetary growth in general and the monetary growth of smaller. dependent economies in particular. In this paper, prima facie Australian statistical evidence is found which is consistent with this postulate. The lag in the association is identified and a model specified and estimated. A post‐sample validation period supports and strengthens the within‐sample results.
The National Economic Summit: Authority, Persuasion and Exchange*
Authors: KEMP D. A.
Published: October 2007

The National Economic Summit can be viewed as a symptom of the extensive use of authority in the Australian economy and equally an expression of the limitations of what can be achieved with centralized authority. An examination of the documentation left by the summit provides an opportunity to assess the implications of policy choices which use persuasion and authority rather than market disciplines.
Improving Mineral Taxation Policy in Australia*
Authors: LLOYD CRAIG EMERSON and P. J.
Published: October 2007

Australian State governments have begun to increase royalty rates and other mineral taxes. The most instructive approach to taxation policy for the minerals sector is to set up a general model of mines which year the optimal structure of taxes. A model of mine production under uncertainty is presented. The optimal tax is a single tax with two parts. a bonus bid and conditional tax payments based on the ex‐post rent of the mine. The actual structure of taxes levied by State and Commonwealth governments is seen to be distinctly sub‐optimal in several respects. Proposals to move the actual to word the optimal structure are made, recognizing some of the constraints on information and the maximum acceptable rate of tax reform.
Covered Interest Parity and Speculative Efficiency: Some Empirical Evidence for Australia*
Authors: TURNOVSKY STEPHEN J. , BALL KATRINA M.
Published: October 2007

Two key relationships which feature prominently through out modern international monetary theory are: (i) covered interest parity and(ii) speculative efficiency of the foreign exchange market, i.e., the unbiasedness of the forward rate as a predictor of the spot rate. This paper presents some empirical evidence for these two hypotheses using Australian data over the period September 1974 to December 1981 during which the Australian dollar was essentially floating. Both quarterly and overlapping monthly data are used. The results obtained generally provide some support for the two hypotheses.
A Note on Factors Influencing the Utilization of Bankcard*
Authors: VOLKER PAUL A.
Published: October 2007

This note is an empirical examination of the nature of factors influencing the utilization of credit cards in Australia. Cross‐section data from a 1980 survey are employed in an attempt to determine what individual characteristics increase the probabilities of holding cards and using extended credit facilities. Aggregative time‐series analysis seeks to explain the trends in Bankcard financing of various types of expenditure.
Economic Forecasts and Their Assessment*
Authors: MACFARLANE I. J. , HAWKINS J. R.
Published: October 2007

This paper looks at the accuracy of economic forecasts in general and by examining a subset of 12 Australian, forecasters over a five‐year period. It also address the question of whether it is possible to rank forecasters in order of merit. The paper concludes that the problem are sufficiently large for it to be highly unlikely that a meaningful and stable ranking could be obtained.
Life‐Cycle Consumption under Rational Expectations: Some Australian Evidence*
Authors: JOHNSON PAUL
Published: October 2007

Using Australian data, this note tests the srochastic implications of Hall's (1978) national‐expectations life‐cycle consumption model. The strong version of the hypothesis can only be rejected using lagged values of the change in the unemployment rate and a particular measure of disposable income.
Do Australian Trade Policies Discriminate Against Less Developed Countries?*
Authors: WARR P. G. , LLOYD P. J.
Published: October 2007

The view that Australian protection discriminates against the less developed countries (LDCs) is examined in this paper. It distinguishes between direct discrimination through tariff preferences and indirect discrimination through inter‐commodity differences in rates of protection. The second mechanism proves to be more important. While Australian protection did not discriminate against the LDCs in 1968–49, by 1977–78 it did. This reflects changes in the commodity composition of Australia's imports from the LDCS.
Extraction of an Exhaustible Resource: The Effects on Investment of Several Parameters Being Subject to Uncertainty*
Authors: FRASER R. W. , NOORDEN R. J. VAN
Published: October 2007

This article shows that the effect on investment of the introduction of uncertainty about the size of one parameter depends on what other parameters are simultaneously uncertain. Further, two parameters may be linked with positive or negative covariances. The covariances are here shown to have important effects on the investor, whether risk neutral or risk averse. Governments are advked to consider policies that affect the covariances of those parameters that are key influences on in vestment.
Relative Wages and the Changing Industrial Distribution of Employment in Australia*
Authors: KEATING MICHAEL
Published: October 2007

A simple model is used to analyze the role of changing relative wages in industry labour market adjustment between 1948–49 and 1979–80. Not with standing Australia's highly centralized system of wage determination, it was found that it has permitted modest changes in wage relativities which were generally in the right direction. To the extent that these changes were sufficient to equilibrate the labour market this probably reflects some important changes in the composition of the labour force and the high elasticity of supply from one industry to another.
A Measure of the Incidence of the Costs of Structural Change: The Experience of Birth place Groups in the Australian Labour Force during the Seventies*
Authors: BONNELL SHEILA M. , DIXON PETER B.
Published: October 2007

During the 1970s there were some marked shifts in the occupational composition of the Australian workforce. It is sometimes argued that these had a particularly adverse effect on migrants. However we conclude that the structural pressures of the early 70s had only a minor impact on the relative labour market performances of different birthplace groups in Australia. The analysis involves the construction of a measure of the incidence of the costs of structural change. The correlation between the measure applied to birthplace groups and various indicators of their labour market performances is found to be low.
Regulation, Risk and the Pricing of Australian Bank Shares, 1957–1976*
Authors: HOGAN WARREN P. , SHARPE IAN G.
Published: October 2007

Recent contributions to the theory of regulation have suggested the possibility of discriminatory regulation affecting risk and profits of firms subject to public intervention. This paper examines risk and wealth effects associated with Australian banking regulation. Support is found for the Peltzman and Edwards and Heggestad hypothesis that regulation reduces risk and for Johnson's hypothesis that statutory reserve deposit requirement policy involves an implicit tax on bank shareholders.
Retail Demand for Meat in Australia: A Utility Theory Approach*
Authors: MURRAY JANE
Published: October 2007

This paper examines Australian retail demand for meat for the post‐war period 1949‐50 to 1978‐79. Several systems of demand equations are estimated, each system (comprising equations for beef, mutton, lamb, pork and chicken) being derived from an underlying static utility function. Model selection procedures are used to determine the preferred specifications). The validity of the utility theory approach is investigated by: testing for the presence of autocorrelation; examining the monotonicity and convexity properties of the utility functions; and comparing the estimated price and expenditure elasticities with those of other Australian studies. Serial correlation does arise as a problem, but other results provide support for the theory.
Further Evidence from Survey Data on Australian Manufacturing Price Changes*
Authors: HALL V. B. , SAUNDERS PETER
Published: October 2007

Three data sets from two different quarterly surveys have been used in estimating six standard models of price change behaviour. Results for Total Manufacturing Industry, for all three data sets, show prices respond to both actual cost movements and commodity market excess demand conditions. For most ASIC two‐digit industries, prices respond rapidly to actual cost movements, and for many industries they also respond directly to excess demand conditions. No single excess demand measure is appropriate for all industries. The magnitude of orders and inventories influences is very small, but capacity utilization contributions seem far from trivial. Industry results are frequently sensitive to the survey used and/or to the method used to weight individual firm's responses.
Oil Price Instability and Domestic Energy Substitution for Imported Oil*
Authors: HILLMAN A.L. , KATZ E.
Published: October 2007

This paper considers the effects of unstable world oil prices on domestic firms seeking substitutes for imported oil. Price instability manifested as price uncertainty is shown to inhibit domestic potential competitors' substitution activities, being analogous to a tax imposed on domestic firms by the dominant oil‐exporters. This tax analogue of price uncertainty is in distinction to the mutual gain scenario of stochastic limit pricing when there is price variability but no uncertainty.
Rationalizing Australian Taxation Revisited*
Authors: GROENEWEGEN P. D.
Published: October 2007

This paper reviews the author's (1971) tax rationalization proposal to examine whether a tax simplification scheme eliminating minor transaction taxes and reducing heavy reliance on personal income tax by introducing a general consumption tax continues to have merit for Australian tax reform. The first part of the paper points to increases in avoidance and evasion as a major change perceivable in Australian taxation between the 1960s and the 1980s and indicates other important changes that have occurred. Section II presents an equity and simplicity case for general indirect consumption taxation supplemented by personal income and wealth taxes. Section III discusses the inter‐governmental financial relations implications of the proposed rationalization. The paper concludes that in the light of events in 1983 such rationalization proposals suitably modified continue to have merit.