Briefing Paper

Between the end of 1979 and the end of 1981 unemployment rose by 1.4 million. After that exceptional period unemployment continued to rise rather less rapidly to its current level of 3.2 million, Of this 3.2 million, about 1.3 million have been unemployed for more than a year. In this Briefing Paper we describe and attempt to explain the processes by which long-term unemployment rose to its current level.
We also discuss two related questions; the first concerns the relationship between unemployment and vacancies and the second concerns the relationship between long-term unemployment and inflation. The final sections consider the policy implications of these findings.     

Storage changes in biscuits

The purpose of this research was to investigate the changes occurring in biscuits under domestic storage conditions. The experimental work involved the storage of manufactured biscuits under closed, open/light and open/dark conditions for appropriate periods of time. Moisture content, texture, colour and peroxide value were determined throughout the storage time. The results indicate that the moisture content of the samples increased under all storage conditions, with a softening of texture. Peroxide values increase with rapid acceleration towards the end of the storage period. Very little change was observed in the colour of the biscuits.     

Financial Covenants in Australian Bank-Loan Contracts: Incidence, Measurement Rules and Monitoring

This paper reports the results of an interview survey of 48 Australian bank lending officers on the use of financial covenants in bank-loan contracts. A wide variety of financial covenants appear to be used. As expected, the accounting measurement rules were generally conservative in nature but they appeared to be less restrictive in other areas. The results were compared with similar studies of Australian public-debt contracts and US and UK bank-loan contracts and considerable cross-market diversity was noted. Evidence on the frequency and method of monitoring these covenants is also documented.     

Capital Equalization and the Australian States

The Australian Grants Commission has recently considered ways to take account of differences in capital costs across States within the existing fiscal equalization formula. Here we develop a theoretical methodology for estimating differences in the costs of capital faced by the States in the General Government Sector. This methodology is used to generate preliminary estimates of State capital cost 'disabilities' from 1962–63 to 1995–96. Finally, we suggest how the methodology and the estimates of capital cost disabilities might be integrated into the Commission's formula to produce a grant distribution which reflects different costs of capital across States.     

The Taylor Principle and Monetary Policy Approaching a Zero Bound on Nominal Rates: Quantile Regression Results for the United States and Japan

This paper offers a new approach that estimates the response of interest rates to inflation and the output gap at various points (quantiles) on the conditional distribution of interest rates. This offers an improvement on empirical estimates conducted only at the mean and also allows us to test the propositions that policy shows greater aggression to inflation in the reaction function in terms of a greater response coefficient as interest rates reach low levels, and increasing aggression as the lower bound is approached. We find support for the Taylor principle, a more aggressive response to inflation than under a Taylor rule, but no detectable evidence of increasing aggression as the zero lower bound is approached in the US and Japan.