Dissertations / Theses on the topic 'Inflation (Finance) Australia Econometric models'

[Truncated abstract] This thesis examines competing asset-pricing models in Australia with the goal of establishing the model which best explains cross-sectional stock returns. The research employs Australian equity data over the period 1980-2001, with the major analyses covering the more recent period 1990-2001. The study first documents that existing asset-pricing models namely the capital asset pricing model (CAPM) and domestic Fama-French three-factor model fail to meet the widely applied Merton?s zero-intercept criterion for a well-specified pricing model. This study instead documents that the US three-factor model provides the best description of Australian stock returns. The three US Fama-French factors are statistically significant for the majority of portfolios consisting of large stocks. However, no significant coefficients are found for portfolios in the smallest size quintile. This result initially suggests that the largest firms in the Australian market are globally integrated with the US market while the smallest firms are not. Therefore, the evidence at this point implies domestic segmentation in the Australian market. This is an unsatisfying outcome, considering that the goal of this research is to establish the pricing model that best describes portfolio returns. Given pervasive evidence that liquidity is strongly related to stock returns, the second part of the major analyses derives and incorporates this potentially priced factor to the specified pricing models ... This study also introduces a methodology for individual security analysis, which implements the portfolio analysis, in this part of analyses. The technique makes use of visual impressions conveyed by the histogram plots of coefficients' p-values. A statistically significant coefficient will have its p-values concentrated at below a 5% level of significance; a histogram of p-values will not have a uniform distribution ... The final stage of this study employs daily return data as an examination of what is indeed the best pricing model as well as to provide a robustness check on monthly return results. The daily result indicates that all three US Fama-French factors, namely the US market, size and book-to-market factors as well as LIQT are statistically significant, while the Australian three-factor model only exhibits one significant market factor. This study has discovered that it is in fact the US three-factor model with LIQT and not the domestic model, which qualifies for the criterion of a well-specified asset-pricing model and that it best describes Australian stock returns.

This thesis is a technical inquiry into remedies for high inflation. In its center there is the usual tradeoff between inflation aversion on the one hand and some benefit from inflation via Phillips curve effects on the other hand. Most remarkable and pioneering work for us is the famous Barro-Gordon model - see (Barro & Gordon 1983a) respectively (Barro & Gordon 1983b). Parts of this model form the basis of our work here. Though being well known the discretionary equilibrium is suboptimal the question arises how to overcome this. We will introduce four different models, each of them giving a different perspective and way of thinking. Each model shows a (sometimes slightly) different way a central banker might deliver lower inflation than the one shot Barro-Gordon game at a first glance would suggest. To cut a long story short we provide a number of reasons for believing that the purely discretionary equilibrium may be rarely observed in real life. Further the thesis provides new insights for derivative pricing theories. In particular, the potential role of financial markets and instruments will be a major focus. We investigate how such instruments can be used for monetary policy. On the contrary these financial securities have strong influence on the behavior of the central bank. Taking this into account in chapters 3 and 4 we come up with a new method of pricing inflation linked derivatives. The latter to the best of our knowledge has never been done before - (Persson, Persson & Svenson 2006), as one of very view economic works taking into account financial markets, is purely focused on the social planer's problem. A purely game theoretic approach is done in chapter 2 to change the original Barro-Gordon. Here we deviate from a purely rational and purely one period wise thinking. Finally in chapter 5 we model an asymmetric information situation where the central banker faces a trade off between his current objective on the one hand and benefit arising from not perfectly informed agents on the other hand. In that sense the central bank is also concerned about its reputation.

This study deals with the estimation of the optimal hedge ratios using various econometric models. Most of the recent papers have demonstrated that the conventional ordinary least squares (OLS) method of estimating constant hedge ratios is inappropriate, other more complicated models however seem to produce no more efficient hedge ratios. Using daily AOIs and SPI futures on the Australian market, optimal hedge ratios are calculated from four different models: the OLS regression model, the bivariate vector autoaggressive model (BVAR), the error-correction model (ECM) and the multivariate diagonal Vcc GARCH Model. The performance of each hedge ratio is then compared. The hedging effectiveness is measured in terms of ex-post and ex-ante risk-return traHe-off at various forcasting horizons. It is generally found that the GARCH time varying hedge ratios provide the greatest portfolio risk reduction, particularly for longer hedging horizons, but hey so not generate the highest portfolio return.

This research questions whether technical trading rules can help predict stock price movements for a sample of stocks selected from four equity markets from the Asia-Pacific region: Australia, Malaysia, Hong Kong and Thailand for the period 1989-2008. The research is split into two stages. Stage-1 of the research tests the predictability of technical trading rules against a buyand- hold strategy. The variable moving average (VMA), fixed moving average (FMA) and the trading range break (TRB) trading rules are applied to this research. Economic predictability of these rules is examined by comparing returns conditional on a trading rule buy (sell) signal against an unconditional buy-and-hold return. Any existence of excess returns can thus be established. This follows with a statistical analysis of returns using a traditional t-test methodology. Traditional statistical tests assume normally distributed returns with independent observations and a non-changing distribution across time. In Stage-2 of this research a bootstrap checks whether features such as non-normality, time-varying moments and serial correlation bias test statistics. The bootstrap involves assumptions regarding the underlying returns generating process (RGP) and allows returns conditional on a trading rule buy (sell) signal from the original stock price series to be compared with conditional returns simulated from four common null models: RW, AR (1), GARCH-M and E-GARCH models. Simulated p-values are calculated in conjunction with simulated distributions and are applied in lieu of the theoretical normal distribution. Given this process it is possible to infer as to whether non-linear dependencies in returns can be captured by any of the three trading rules. Given the null model output standard t-test outcomes of predictability of technical trading rules may be diminished and/or eliminated. Conclusions are drawn as to the predictability and profitability of the VMA, FMA and TRB trading rules when applied to the chosen stock samples. Findings of this research indicate returns conditional on technical trading rules exceed unconditional buy-and-hold returns for all stocks. Thai sample output indicates strong support in favour of the predictability of standard test results supporting the use of technical trading rules. Output for Australia, Hong Kong and Malaysia indicates that previous standard t-test outcomes of predictability may be diminished and/or eliminated. This implies that the underlying RGP may be characterised by underlying features of some/all of the stochastic models.

This thesis addresses three relevant macroeconomic issues: (i) why

Central Banks behave so cautiously compared to optimal theoretical

benchmarks, (ii) do monetary variables add information about

future Euro Area inflation to a large amount of non monetary

variables and (iii) why national saving and investment are so

correlated in OECD countries in spite of the high degree of

integration of international financial markets.

The process of innovation in the elaboration of economic theory

and statistical analysis of the data witnessed in the last thirty

years has greatly enriched the toolbox available to

macroeconomists. Two aspects of such a process are particularly

noteworthy for addressing the issues in this thesis: the

development of macroeconomic dynamic stochastic general

equilibrium models (see Woodford, 1999b for an historical

perspective) and of techniques that enable to handle large data

sets in a parsimonious and flexible manner (see Reichlin, 2002 for

an historical perspective).

Dynamic stochastic general equilibrium models (DSGE) provide the

appropriate tools to evaluate the macroeconomic consequences of

policy changes. These models, by exploiting modern intertemporal

general equilibrium theory, aggregate the optimal responses of

individual as consumers and firms in order to identify the

aggregate shocks and their propagation mechanisms by the

restrictions imposed by optimizing individual behavior. Such a

modelling strategy, uncovering economic relationships invariant to

a change in policy regimes, provides a framework to analyze the

effects of economic policy that is robust to the Lucas'critique

(see Lucas, 1976). The early attempts of explaining business

cycles by starting from microeconomic behavior suggested that

economic policy should play no role since business cycles

reflected the efficient response of economic agents to exogenous

sources of fluctuations (see the seminal paper by Kydland and Prescott, 1982}

and, more recently, King and Rebelo, 1999). This view was challenged by

several empirical studies showing that the adjustment mechanisms

of variables at the heart of macroeconomic propagation mechanisms

like prices and wages are not well represented by efficient

responses of individual agents in frictionless economies (see, for

example, Kashyap, 1999; Cecchetti, 1986; Bils and Klenow, 2004 and Dhyne et al. 2004). Hence, macroeconomic models currently incorporate

some sources of nominal and real rigidities in the DSGE framework

and allow the study of the optimal policy reactions to inefficient

fluctuations stemming from frictions in macroeconomic propagation

mechanisms.

Against this background, the first chapter of this thesis sets up

a DSGE model in order to analyze optimal monetary policy in an

economy with sectorial heterogeneity in the frequency of price

adjustments. Price setters are divided in two groups: those

subject to Calvo type nominal rigidities and those able to change

their prices at each period. Sectorial heterogeneity in price

setting behavior is a relevant feature in real economies (see, for

example, Bils and Klenow, 2004 for the US and Dhyne, 2004 for the Euro

Area). Hence, neglecting it would lead to an understatement of the

heterogeneity in the transmission mechanisms of economy wide

shocks. In this framework, Aoki (2001) shows that a Central

Bank maximizing social welfare should stabilize only inflation in

the sector where prices are sticky (hereafter, core inflation).

Since complete stabilization is the only true objective of the

policymaker in Aoki (2001) and, hence, is not only desirable

but also implementable, the equilibrium real interest rate in the

economy is equal to the natural interest rate irrespective of the

degree of heterogeneity that is assumed. This would lead to

conclude that stabilizing core inflation rather than overall

inflation does not imply any observable difference in the

aggressiveness of the policy behavior. While maintaining the

assumption of sectorial heterogeneity in the frequency of price

adjustments, this chapter adds non negligible transaction

frictions to the model economy in Aoki (2001). As a

consequence, the social welfare maximizing monetary policymaker

faces a trade-off among the stabilization of core inflation,

economy wide output gap and the nominal interest rate. This

feature reflects the trade-offs between conflicting objectives

faced by actual policymakers. The chapter shows that the existence

of this trade-off makes the aggressiveness of the monetary policy

reaction dependent on the degree of sectorial heterogeneity in the

economy. In particular, in presence of sectorial heterogeneity in

price adjustments, Central Banks are much more likely to behave

less aggressively than in an economy where all firms face nominal

rigidities. Hence, the chapter concludes that the excessive

caution in the conduct of monetary policy shown by actual Central

Banks (see, for example, Rudebusch and Svennsson, 1999 and Sack, 2000) might not

represent a sub-optimal behavior but, on the contrary, might be

the optimal monetary policy response in presence of a relevant

sectorial dispersion in the frequency of price adjustments.

DSGE models are proving useful also in empirical applications and

recently efforts have been made to incorporate large amounts of

information in their framework (see Boivin and Giannoni, 2006). However, the

typical DSGE model still relies on a handful of variables. Partly,

this reflects the fact that, increasing the number of variables,

the specification of a plausible set of theoretical restrictions

identifying aggregate shocks and their propagation mechanisms

becomes cumbersome. On the other hand, several questions in

macroeconomics require the study of a large amount of variables.

Among others, two examples related to the second and third chapter

of this thesis can help to understand why. First, policymakers

analyze a large quantity of information to assess the current and

future stance of their economies and, because of model

uncertainty, do not rely on a single modelling framework.

Consequently, macroeconomic policy can be better understood if the

econometrician relies on large set of variables without imposing

too much a priori structure on the relationships governing their

evolution (see, for example, Giannone et al. 2004 and Bernanke et al. 2005).

Moreover, the process of integration of good and financial markets

implies that the source of aggregate shocks is increasingly global

requiring, in turn, the study of their propagation through cross

country links (see, among others, Forni and Reichlin, 2001 and Kose et al. 2003). A

priori, country specific behavior cannot be ruled out and many of

the homogeneity assumptions that are typically embodied in open

macroeconomic models for keeping them tractable are rejected by

the data. Summing up, in order to deal with such issues, we need

modelling frameworks able to treat a large amount of variables in

a flexible manner, i.e. without pre-committing on too many

a-priori restrictions more likely to be rejected by the data. The

large extent of comovement among wide cross sections of economic

variables suggests the existence of few common sources of

fluctuations (Forni et al. 2000 and Stock and Watson, 2002) around which

individual variables may display specific features: a shock to the

world price of oil, for example, hits oil exporters and importers

with different sign and intensity or global technological advances

can affect some countries before others (Giannone and Reichlin, 2004). Factor

models mainly rely on the identification assumption that the

dynamics of each variable can be decomposed into two orthogonal

components - common and idiosyncratic - and provide a parsimonious

tool allowing the analysis of the aggregate shocks and their

propagation mechanisms in a large cross section of variables. In

fact, while the idiosyncratic components are poorly

cross-sectionally correlated, driven by shocks specific of a

variable or a group of variables or measurement error, the common

components capture the bulk of cross-sectional correlation, and

are driven by few shocks that affect, through variable specific

factor loadings, all items in a panel of economic time series.

Focusing on the latter components allows useful insights on the

identity and propagation mechanisms of aggregate shocks underlying

a large amount of variables. The second and third chapter of this

thesis exploit this idea.

The second chapter deals with the issue whether monetary variables

help to forecast inflation in the Euro Area harmonized index of

consumer prices (HICP). Policymakers form their views on the

economic outlook by drawing on large amounts of potentially

relevant information. Indeed, the monetary policy strategy of the

European Central Bank acknowledges that many variables and models

can be informative about future Euro Area inflation. A peculiarity

of such strategy is that it assigns to monetary information the

role of providing insights for the medium - long term evolution of

prices while a wide range of alternative non monetary variables

and models are employed in order to form a view on the short term

and to cross-check the inference based on monetary information.

However, both the academic literature and the practice of the

leading Central Banks other than the ECB do not assign such a

special role to monetary variables (see Gali et al. 2004 and

references therein). Hence, the debate whether money really

provides relevant information for the inflation outlook in the

Euro Area is still open. Specifically, this chapter addresses the

issue whether money provides useful information about future

inflation beyond what contained in a large amount of non monetary

variables. It shows that a few aggregates of the data explain a

large amount of the fluctuations in a large cross section of Euro

Area variables. This allows to postulate a factor structure for

the large panel of variables at hand and to aggregate it in few

synthetic indexes that still retain the salient features of the

large cross section. The database is split in two big blocks of

variables: non monetary (baseline) and monetary variables. Results

show that baseline variables provide a satisfactory predictive

performance improving on the best univariate benchmarks in the

period 1997 - 2005 at all horizons between 6 and 36 months.

Remarkably, monetary variables provide a sensible improvement on

the performance of baseline variables at horizons above two years.

However, the analysis of the evolution of the forecast errors

reveals that most of the gains obtained relative to univariate

benchmarks of non forecastability with baseline and monetary

variables are realized in the first part of the prediction sample

up to the end of 2002, which casts doubts on the current

forecastability of inflation in the Euro Area.

The third chapter is based on a joint work with Domenico Giannone

and gives empirical foundation to the general equilibrium

explanation of the Feldstein - Horioka puzzle. Feldstein and Horioka (1980) found

that domestic saving and investment in OECD countries strongly

comove, contrary to the idea that high capital mobility should

allow countries to seek the highest returns in global financial

markets and, hence, imply a correlation among national saving and

investment closer to zero than one. Moreover, capital mobility has

strongly increased since the publication of Feldstein - Horioka's

seminal paper while the association between saving and investment

does not seem to comparably decrease. Through general equilibrium

mechanisms, the presence of global shocks might rationalize the

correlation between saving and investment. In fact, global shocks,

affecting all countries, tend to create imbalance on global

capital markets causing offsetting movements in the global

interest rate and can generate the observed correlation across

national saving and investment rates. However, previous empirical

studies (see Ventura, 2003) that have controlled for the effects

of global shocks in the context of saving-investment regressions

failed to give empirical foundation to this explanation. We show

that previous studies have neglected the fact that global shocks

may propagate heterogeneously across countries, failing to

properly isolate components of saving and investment that are

affected by non pervasive shocks. We propose a novel factor

augmented panel regression methodology that allows to isolate

idiosyncratic sources of fluctuations under the assumption of

heterogenous transmission mechanisms of global shocks. Remarkably,

by applying our methodology, the association between domestic

saving and investment decreases considerably over time,

consistently with the observed increase in international capital

mobility. In particular, in the last 25 years the correlation

between saving and investment disappears.

Doctorat en sciences économiques, Orientation économie
info:eu-repo/semantics/nonPublished

In 1993, Kenya liberalised its trade policy and allowed the Kenyan Shillings to freely float. This openness has left Kenya's domestic prices vulnerable to the effects of exchange rate fluctuations. One of the objectives of the Central Bank of Kenya is to maintain inflation levels at sustainable levels. Thus it has become necessary to determine the influence that exchange rate changes have on domestic prices given that one of the major determinants of inflation is exchange rate movements. For this reason, this thesis examines the magnitude and speed of exchange rate pass-through (ERPT) to domestic prices in Kenya. In addition, it takes into account the direction and size of changes in the exchange rates to determine whether the exchange rate fluctuations are symmetric or asymmetric. The thesis uses quarterly data ranging from 1993:Ql - 2008:Q4 as it takes into account the period when the process of liberalization occurred. The empirical estimation was done in two stages. The first stage was estimated using the Johansen (1991) and (1995) co integration techniques and a vector error correction model (VECM). The second stage entailed estimating the impulse response and variance decomposition functions as well as conducting block exogeneity Wald tests. In determining the asymmetric aspect of the analysis, the study followed Pollard and Coughlin (2004) and Webber (2000) frameworks in analysing asymmetry with respect to appreciation and depreciation and large and small changes in the exchange rate to import prices. The results obtained showed that ERPT to Kenya is incomplete but relatively low at about 36 percent in the long run. In terms of asymmetry, the results showed that ERPT is found to be higher in periods of appreciation than depreciation. This is in support of market share and binding quantity constraints theory. In relation to size changes, the results show that size changes have no significant impact on ERPT in Kenya.

The relevance of domestic and foreign capacity utilization rates in forecasting future inflation rate has been investigated empirically, using five industrialized countries for which the comparable data are available. It has been found that capacity utilization rates, both domestic and foreign, have a long run stable relationship with domestic inflation rate and a positive shock in the capacity utilization rate results in a significant, although a little bit delayed, acceleration in the domestic inflation rate. Various econometric techniques have been used and led to consistent empirical findings. The results in the present study, therefore, dispute the claim that an increase in capacity utilization rate may not necessarily lead to an accelerated inflation down the road.
Graduation date: 1995

Yuan, Jiang.
Thesis (M.Phil.)--Chinese University of Hong Kong, 2009.
Includes bibliographical references (leaves 48-51).
Abstract also in Chinese.
Chapter Chapter 1 --- Introduction --- p.1
Chapter Chapter 2 --- Literature Review --- p.5
Chapter 2.1 --- Theoretical Literature --- p.5
Chapter 2.1.1 --- Menu Cost Model --- p.5
Chapter 2.1.2 --- Signal Extraction Model --- p.6
Chapter 2.1.3 --- Monetary Search Model --- p.7
Chapter 2.2 --- Empirical Literature --- p.8
Chapter Chapter 3 --- Inflation and Relative Price Variability in a Transitional Economy Evidence from China --- p.10
Chapter 3.1 --- Data and Variables --- p.10
Chapter 3.2 --- Inflation Decomposition --- p.19
Chapter 3.3 --- Empirical Evidence --- p.14
Chapter 3.3.1 --- Inflation and RPV --- p.14
Chapter 3.3.2 --- Robustness --- p.18
Chapter 3.4 --- Conclusion --- p.20
Chapter Chapter 4 --- Inflationary Regimes and Relative Prices --- p.22
Chapter 4.1 --- Introduction --- p.22
Chapter 4.2 --- The Change of Inflationary Regimes in China: 1978-2008 --- p.23
Chapter 4.3 --- Inflationary Regimes and Relative Price --- p.25
Chapter 4.3.1 --- Preliminary Evidence --- p.25
Chapter 4.3.2 --- Empirical Evidence --- p.27
Chapter 4.4 --- Structure Change --- p.32
Chapter 4.4.1 --- Endogenous Breakpoint Test --- p.32
Chapter 4.4.2 --- Test Results on the Changing Role of Expected Inflation --- p.33
Chapter 4.5 --- Conclusion --- p.35
Chapter Chapter 5 --- Institutional Cost and Relative Price Variability --- p.36
Chapter 5.1 --- Introduction --- p.36
Chapter 5.2 --- "Institutional Cost, Price Adjustment, and Relative Price Variability in China" --- p.38
Chapter 5.2.1 --- Background --- p.38
Chapter 5.2.2 --- Institutional cost --- p.39
Chapter 5.2.3 --- The relationship between institutional cost and relative price variability --- p.42
Chapter 5.3 --- The Empirical Evidence --- p.43
Chapter 5.4 --- Conclusion --- p.45
Chapter Chapter 6 --- Conclusion and Implications --- p.46
Reference --- p.48

My dissertation focuses upon low inflation. Many developed countries, especially Japan and the Eurozone, have recently experienced prolonged periods of below-target inflation. This has been blamed for many economic ills including worsening the Great Recession and generating a slow recovery, making monetary policy ineffective and leading to lower labor market flexibility. I study what has caused low inflation, its potential effects and how it could be prevented. In Chapter 1, I look at how effective raising the inflation target would be in mitigating the problems of low inflation. Many economists have proposed raising the inflation target to reduce the probability of hitting the zero lower bound (ZLB). It is both widely assumed and a feature of standard models that raising the inflation target does not impact the equilibrium real rate. I demonstrate that once heterogeneity is introduced, raising the inflation target causes the equilibrium real rate to fall in the New Keynesian model. This implies that raising the inflation target will increase the nominal interest rate by less than expected and thus will be less effective in reducing the probability of hitting the ZLB. The channel is that a rise in the inflation target lowers the average markup by price rigidities and a fall in the average markup lowers the equilibrium real rate by household heterogeneity which could come from overlapping generations or idiosyncratic labor shocks. Raising the inflation target from 2% to 4% lowers the equilibrium real rate by 0.38 percentage points in my baseline calibration. I also analyse the optimal inflation level and provide empirical evidence in support of the model mechanism. In Chapter 2, I study to what degree the recent fall in inflation can explain the rise in firm profitability which has been blamed for a rise in inequality. A theoretical relationship between inflation and profitability is known to exist. I investigate the degree to which the recent fall in inflation can explain the rise in firm profitability. My three primary findings are: 1. The negative relationship between inflation and profitability does not hinge upon the Calvo assumption. Raising inflation significantly lowers profitability under all common price rigidities. The relationship can actually be significantly stronger under menu costs. 2. A rise in the degree to which firms discount the future magnifies the effect; a rise in elasticity of substitution can increase or decrease the effect depending upon the price rigidity. 3. The profit share has risen by around 3.5p.p. since the 1990s. In a richer model with firm heterogeneity, the recent fall in inflation is estimated to explain 14% of the rise. This can increase to 29% if firms are allowed to discount the future by more in line with estimates from the finance literature. I also provide empirical evidence for the negative relationship between inflation and firm profits. In Chapter 3, I examine whether behavioral features can help to explain why some countries have persistently experienced low inflation at the zero lower bound. Economists are keen to introduce behavioral assumptions into modern macroeconomic models. A popular framework for doing so is sparse dynamic programming, which assumes that agents partly base their expectations upon a default model which is typically the steady state. This means agents' expectations will be wrong if there are long-run deviations from the default model and assumes agents can compute the default. I introduce an alternative form of sparse dynamic programming which tackles these problems by allowing for long-run updating to the behavioral part of agents' expectations. I apply this to derive a long-run behavioral New Keynesian model. Within this model, fixed interest rates yield indeterminacy and the costs of remaining at the zero lower bound are unbounded. These results are very different to a behavioral New Keynesian model based upon standard sparse dynamic programming, which can yield determinacy under fixed interest rates and bounded costs of the zero lower bound.

This study investigated the impact of import prices on inflation in Namibia, using quarterly time series data over the period 1998Q2-2017Q4. The variables used in the study are inflation rate, M2, real GDP and import prices. The study found that all the variables are integrated of order one (1), and upon testing for cointegration using Johansen test, there was no cointegration. Therefore, the model was analysed using ordinary least squares (OLS) techniques of vector autoregression (VAR) approach, granger causality test and the impulse response function. The results of the study revealed that import prices granger causes inflation at 1% level of significance. Inflation is also granger caused by real GDP and broad money supply (M2) does not Granger cause inflation. The study further revealed that the shocks to import prices are significant in explaining variation in inflation both in the short run and in the long term.
Economics
M. Com. (Economics)

Thesis submitted in partial fulfilment of the requirements for the degree of Master of Management in Finance and Investments in the Faculty of Commerce, Law and Management Wits Business School at the University of the Witwatersrand February 2017
For developed economies, it has been shown that the slope of the yield curve is a good indicator of the future path of real output and inflation. This paper investigates the predictive abilities of the yield curve slope for domestic growth and inflation in emerging market economies. Given the sovereign risk premia in these economies, it also assesses whether adding the sovereign risk spread to the yield curve spread improves the predictive content of the yield curve. It finds that the yield curve can predict real output at both the short and long forecasting horizons in emerging economies, the extent of which differs across countries. It also finds that the predictive performance for inflation is weaker than that of output growth, especially in the shorter forecasting horizons, and that the sovereign risk spread has additional predictive content for growth and inflation. This suggests that market participants and monetary policy makers in these economies should supplement their forecasting models with information contained in the yield curve to forecast domestic growth and inflation.
MT2017

A thesis submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in fullment of the requirements for the Doctor of Philosophy in Economics Degree, June 2017
This thesis contains three main chapters. The rst chapter employs wageprice spirals to generate ination forecasts for Australia, Canada, France, South Korea, South Africa, United Kingdom and the United States. We use three competing specications of the wage-price spirals, and test which specication provides the best forecasts of price ination. For each specication we provide one quarter, four quarter and eight quarter ahead dynamic forecasts of price ination. The rst two wage-price spirals in the rst chapter are from the Keynesian tradition from te standpoint of expectations formation. The chapter also considers the New Keynesian wage-price spiral. We use the Root Means Square Error and the Clark and West statistic to compare the performance of ination forecasts from the three competing wage-price spirals that we consider in the rst chapter of the thesis. We nd that the New Keynesian wage and price specication su⁄ers from the wrong sign problem, and its forecasts of price ination generally outperform those from the old Keynesian wage price spiral for the eight quarter ahead time horizon. The usefulness of this nding to the conduct of monetary policy is limited due to the wrong sign problem of the forcing variable in the New Keynesian wageprice spiral. We also nd that the Flaschel type specication of price and wage ination produce four and eight quarter head ination forecasts that are better than those from the Fair type specication. We further nd that the Fair type specication price and wage equation produce the best forecasts of ination for the one quarter ahead time horizon. In the second chapter, we estimate natural variables and test their ability to explain the ination process for the eight countries that we consider. We use the traditional Keynesian wage-price spiral and the triangle system approaches to estimate the NAIRU and potential output. In the case of the traditional Keynesian wage-price spiral, the price Phillips curve, which can be specied as a triangle Phillips curve, features backward looking ination expectations and nominal wage ination, the output gap and supply shocks. The nominal wage Phillips curve features ination expectations and price ination and the unemployment gap. The presence of price ination in the nominal wage Phillips curve and the presence of nominal wage ination in the price Phillips curve leads to the interaction between the two Phillips curves. The separate demand pressure terms allows for their identication since, as someauthorsintheliteraturearguethatthegoodsandlabourmarketsdonot move in line with each other. To compute the NAIRU and potential output using the Keynesian approach, we rstly exploit the information contained in vector of unobservable by estimating the wage-price spiral in di⁄erence form using the Seemingly Unrelated Regression method. We use this regression method in order to control for any correlation that may exist between errors in the price and wage Phillips curves. This allows us to solve for the vector of potential output and the NAIRU. We then the moving average technique in order to avoid problems associated with the HP lter for smoothing. Due to data availability, use the MA (20) approximation of the low pass lter after padding the endpoints with forecasts from an AR(4) process. We follow a similar procedure in the estimation of the estimation of the NAIRU and potential output for the triangle system approach. To test which method produces the best natural variables, we t the gaps that are computed from the NAIRU and potential output in a simple single equation price Phillips curve. To test which specication produces the best natural varibles we use a simple single equation triangle price Phillips curve. We nd that the output gaps computed from the two competing approaches are signicantly correlated, the same applies to the unemployment gaps computed from the two approaches. We nd that the quality of unemployment rate gaps computed from the Keynesian and triangle system approach to produce similar quality of results when tted to a single equation triangle price Phillips curve. The Keynesian approach slightly outperforms the triangle systems approach in the when considering the output gap as a proxy for the demand pressure. These results indicate that the wage-price spiral still remains an important tool in the determination of the dynamics ination. In the third chapter, we analyze the relationship between monetary policy and natural variables for Australia, Canada, France, South Korea, South Africa, United Kingdom and the United States. We do this by specifying a relationship between natural rates and the real interest rate. The theoretical relationship between the two variables is positive in the case of the NAIRU and negative through Okuns law in the case of potential output. We regress the natural variable against a constant and the MA(8) of the real interest rate. We nd that the parameter of the real interest rate generally has a correct sign when considering the Keynesian approach computed NAIRUs, with only four being signicant. In the case of the triangle system approach NAIRU, we nd that the real interest rate parameter has a correct sign and signicant four countries. We nd that NAIRUs computed using di⁄erent methodologies can produce a di⁄erent reference point for policy makers. We then introduce hysteresis in the relationship between monetary policy and the NAIRU. We then nd that the interest rate parameter generally has a incorrect sign across the three approaches. The HP ltering approach which we include in our study for comparison purposes produces incorrect correlation for all the countries, while the Keynesian approach negative correlation for seven countries, and the triangle system approach in six countries. In the case of the relationship between monetary policy and potential output, we nd that the real interest rate parameter has an incorrect sign. When introducing hysteresis in the relationship between monetary policy and potential we nd that, unlike in the case of the NAIRU this plays signicant role in the relationship.
XL2018

Australia may present a special case in the analysis of strikes because, for most of the Twentieth Century, the Australian Industrial Relations Commission has acted as an industrial "umpire" charged with keeping the industrial peace. We begin with a review of major contributions to the theory of strikes, and reestimations and evaluations of the time-series models of previous Australian researchers. We then develop theoretical models of strikes and non-strike industrial action, stemming from Marshall's (1920) contribution to the theory of wages. If higher real wages lead to lower levels of employment, union demands are likely to be greater, and industrial action more frequent, when the duration of unemployment of retrenched workers is shorter. Important determinants of the opportunity costs of wage demands to employees, are wage losses of retrenched employees during unemployment and in subsequent re-employment. Critical in the union's decision to threaten a strike or a non-strike action, is a permanent loss of market share directly associated with strikes. The model of strikes is tested, along with variables suggested by other theories, using time-series data from the period 3:1959 to 4:1992. We show that the model is robust and out-performs modified versions of other Australian models. We find that the Prices and Incomes Accord is associated with a reduction in strike activity, but that other researchers have over-estimated its impact. Australian Workplace Industrial Relations Survey data is used to produce cross-sectional models of strikes and non-strike actions in unionised workplaces. We test the importance of the opportunity costs of wage demands and strikes, using variables describing the firm's competitive environment and local labour market conditions. Because the objectives of workplaces differ, we estimate separate models for privately owned workplaces, government non-commercial establishments and government business enterprises. All empirical models are broadly consistent with the predictions of our theoretical model.

Thesis (Ph. D.)--Florida State University, 2005.
Advisor: Dr. Stefan Norrbin, Florida State University, College of Social Sciences, Dept. of Economics. Title and description from dissertation home page (viewed Sept. 21, 2005). Document formatted into pages; contains xii,163 pages. Includes bibliographical references.

The Australian Trade Deficit (TD) has been increasing in the past 50 years, and this deficit has become more significant in the last few decades. This rising TD level in Australia has brought the national debt level to a new height, making this country one of the world‟s highest debt-ridden countries. The most alarming fact associated with these trends is that Australia‟s ability to service the increasing debt levels in the future has been diminishing since the increasing debt levels in Australia have been predominantly used for Consumption (C) rather than for gross capital formation. The diminishing ability to service the increasing debt levels in Australia is due to the fact that the TD level is increasing as a proportion of the Australian Gross Domestic Product (GDP), while the Australian gross capital formation as a proportion of the Australian debt is one of the lowest amongst the major debtor countries in the world.

Using 1980 - 2012 annual data, the study empirically investigates the dynamic relationship between financial development and economic growth in three developing countries (South Africa, Brazil and Kenya) and three developed countries (United States of America, United Kingdom and Australia). The study was motivated by the current debate regarding the role of financial development in the economic growth process, and their causal relationship. The debate centres on whether financial development impacts positively or negatively on economic growth and whether it Granger-causes economic growth or vice versa. To this end, two models have been used. In Model 1 the impact of bank- and market-based financial development on economic growth is examined, while in Model 2 it is the causality between the two that is explored. Using the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and error-correction based causality test, the results were found to differ from country to country and over time. These results were also found to be sensitive to the financial development proxy used. Based on Model 1, the study found that the impact of bank-based financial development on economic growth is positive in South Africa and the USA, but negative in the U.K – and neither positive nor negative in Kenya. Elsewhere the results were inconclusive. Market-based financial development was found to impact positively in Kenya, USA and the UK but not in the remaining countries. Based on Model 2, the study found that bank-based financial development Granger-causes economic growth in the UK, while in Brazil they Granger-cause each other. However, in South Africa, Kenya and USA no causal relationship was found. In Australia the results were inconclusive. The study also found that in the short run, market-based financial development Granger-causes economic growth in the USA but that in South Africa and Brazil, the reverse applies. On the other hand bidirectional causality was found to prevail in Kenya in the same period.
Economics
DCOM (Economics)