On the reduced macroeconomic volatility of the Australian economy: Good policy or good luck?

The Australian economy has experienced various changes in macroeconomic conditions over the past four decades. These changes have been associated with reduced volatility in key macroeconomic variables: CPI inflation, real GDP and the TWI measured real exchange rate. In light of this fact, my objective in this paper is to determine whether this reduction is associated with good policy or good luck. To this end, I estimate a time varying structural VAR model that is identified with theoretically consistent sign restrictions from a small open economy dynamic stochastic general equilibrium model. The primary result is that both non-systematic and systematic monetary policy have changed over the past four decades. In particular, non-systematic responses of inflation, real GDP and the exchange rate have increased since the adoption of a flexible exchange rate in 1983, while systematic responses of the cash rate to inflation have experienced various changes in intensities, exhibiting a trend towards a more passive behaviour since the 2007/08 financial crisis. Taken together, these results suggest that the reduction in macroeconomic volatility is associated with good policy.     

Monopoly,intermediate goods and the pure theory of international trade

Conclusion In a model with two traded good sectors between which intersectoral flows of intermediate goods are allowed and with a monopolized non-traded good sector, the wage rate in terms of two traded goods increases and the rental of capital in terms of two traded goods decreases when the price of relatively more labor intensive traded good sector increases, though nothing definite can be said about the direction of change in the wage rate and rental in terms of the non-traded good. When prices of traded goods are kept constant and labor and/or capital increase(s), output of the non-traded good sector increases provided that the non-traded good is not inferior, having income elasticity of demand less than unity. The factor intensity condition for the traded goods is in general not sufficient for the validity of the Rybczynski theorem to hold with respect to net outputs of the traded goods. We have derived sufficient conditions for the magnification effect to be observed with respect to net outputs of the traded good sectors. Specifically, we have shown that the factor intensity condition (23) is sufficient for the magnification effect to prevail when only labor increases.     

On the evolution of conditional cooperation

A long series of laboratory and field experiments, as well as conventional empirical studies, has established that (1) individuals voluntarily provide themselves with public goods at levels exceeding those predicted by the Nash voluntary contributions mechanism, and (2) agents reciprocate increases in the contributions of their counterparts in such settings (conditional cooperation). This paper presents a simple model of the evolution of preferences for conditional cooperation in the presence of a public good, which explains these two empirical findings without employing reputational or group selection arguments. In this model, individuals inherit preferences to match other agents' contributions to the provision of a public good, at some specified “matching rate.” Agents whose preferences induce them to be relatively successful – in material terms – increase in number, from one generation to the next. Under complete information and with randomly matched groups of N agents who have quasilinear preferences over the public good and a private good, the unique evolutionarily stable matching rate is 1, leading to Pareto optimal voluntary provision of the public good, regardless of group size N. The evolutionarily stable matching rate can be viewed as an endogenous social norm.     

Empirical measures of factors affecting social rates of discount

Economists have long considered possible divergences between private and social rates of time preferences. In this paper, we investigate factors hypothesized to affect this potential divergence. Results indicate that time preferences of individuals may be influenced by: 1. whether the resource in question is publicly or privately managed (respondents tend to have lower rates of time prefernce for publicly managed resources); and 2. the type of good being managed (respondents tend to have lower rates of time preference for income derived from a forest than for income derived from a portfolio of stocks and bonds). Additional factors which may influence the revealed rate of time preference include the pattern of benefits derived over time and various personal characteristics of the respondent. Although numerous methodological problems cloud the issues, our results suggest that capital markets may fail to aggregate utility over individuals and between goods, and that it may therefore be appropriate for governments to consider using lower rates of discount than the private sector, and to vary the rate used according to the type of good being evaluated.     

Does cultural diversity increase the rate of entrepreneurship?

In the economic development literature, cultural diversity (for example, ethnolinguistic fractionalization) has been shown to have a negative impact on economic outcomes in many underdeveloped countries. We hypothesize that the impact of diversity on economic performance depends on the quality of a country's institutions. Under bad institutions diversity leads to conflict and expropriation, while under good institutions diversity leads to economic progress. A culturally diverse society or interaction among different cultures encourages exchange of, and competition between ideas and different world views. Under good institutions, this amalgamation of ideas and views leads to greater entrepreneurial initiatives. We show that higher levels of cultural diversity increase the rate of entrepreneurship in the presence of good institutions using evidence from the USA.     

THE WELFARE EFFECTS OF FOREIGN CAPITAL INFLOW WITH TARIFF-RIDDEN AND QUOTA-RESTRICTED IMPORTS*

The welfare effects of foreign capital inflow and changes in the foreign price and tariff rate of a tariff-ridden imported good are considered for a small country for both 3 times 2 and 3 times 3 trade models with a quota-restricted imported good (whose special case is a nontraded good). For the 3 times 2 model, foreign capital inflow does not affect home welfare when there is no tariff on imports, but it harms the home country if a tariff is imposed on the imports to the extent that the tariff-ridden imported good is more capital intensive than the exported good. On the other hand, for the 3 times 3 model the foreign-capital inflow benefits the home country if the tariff rate is below a certain level under the analogous capital-intensity assumptions. The welfare effects of changes in the foreign price of the tariff-ridden good and its tariff rate remain the same for both models.     

ARE POLICY RULES BETTER THAN THE DISCRETIONARY SYSTEM IN TAIWAN?

This article investigates whether the Central Bank of China in Taiwan (CBC) would have had a more successful monetary policy during the period 1978:3 to 1999:4 if it had followed an optimal rule rather than the discretionary policies that were actually employed. The article examines the use of three different instruments—the rediscount rate, M2, and reserve money—with several different targets—the growth rate of nominal output, inflation, the percentage change in the exchange rate, and the growth rate of a monetary aggregate. Only 4 of 64 rules considered resulted in a statistically significant improvement in the performance of the Taiwanese economy. Given that this study analyzes the economy of Taiwan with revised data that were not available to the CBC in real time, and given that so few of the rules would have improved the economy's performance, it is concluded that the performance of the CBC has been very good.     

Variety,growth and demand

A dynamic model of demand compatible with a changing composition of the economic system is presented in this paper. Consumers are not expected to have completely formed preferences for radically new objects of consumption. Consumers adopt new goods or services ,created by innovation, only if three barriers are overcome: 1) a critical (minimum) level of income, 2) critical human capital, 3) critical fitness. However, even a new good or service with a fitness higher than that of pre-existing ones, will not be immediately adopted. Consumers'.limited knowledge will slow down the rate of adoption of any new good or service.     

一般均衡中的利率、确定性与最优规则

利率规则理论是以短期利率作为货币政策工具而发展起来的一套新的理论,它体现了货币经济学家在货币政策领域内的新的尝试和努力。在利率规则理论中,货币经济学家试图解决两个问题:利率规则冲击对非政策经济变量的短期影响是什么,以及一个好的利率规则应当具有怎样的性质。利率规则将短期利率作为非政策经济变量的内生反应函数,使得货币经济学家可以在一般均衡模型中探讨这两个问题。然而,由于利率规则从一开始就是出于一种偏好的设定,因此,讨论的结果并不符合稳健性和科学性的要求,这就削弱了理论预言的可靠性。在某种意义上,利率规则理论若想成为一门真正的"科学的艺术",它就必须为内生利率规则寻找到一个坚固的微观基础。本文梳理评述了利率规则理论在经验上和理论上的成就和不足。     

基于反倾销应诉的企业内部控制研究

一直以来,我国出口企业遭遇反倾销调查呈愈演愈烈之势,而我国企业普遍存在“应诉率”“胜诉率”双低和最终裁定的反倾销税率较高的问题。企业出现“两低”、“一高”的主要原因在于内部控制制度不健全,缺乏良好的内部控制环境,风险意识淡薄,控制程序和内部监督不到位,不能有效实施信息沟通。因此,从反倾销应诉的视角研究企业内部控制,加强内部控制建设,提高会计信息质量,是提高出口企业反倾销诉讼的应诉率和胜诉率的根本途径。     

Heterogeneous Preferences for Community Recycling Programs

This paper examines household preferences for community recycling programs, which have both public and private good dimensions. The data come from a survey conducted in Seattle (WA) which elicited stated preference-contingent ratings for different recycling programs relative to status quo, with experimental variation in the overall community recycling rate achieved and expected household cost. The recycling rate is interpreted as capturing the public benefits of recycling programs and constitutes the most common measure used by policy agencies for setting waste management objectives and evaluating policy initiatives. The analysis begins with fixed parameter models that explore different ways of handling rating data and mixed logit estimations that capture household preference heterogeneity both within and across different recycling programs. This analysis yields unique estimates of willingness to pay for an increase in the community recycling rate. Predicted individual-specific utility parameters are then regressed on household background information to explicitly examine the nature of preference heterogeneity. Overall, this paper generates interpretable policy-relevant insights into the public and private good dimensions of community recycling programs.     

Optimal Utilitarian Taxation and Horizontal Equity

We impose a horizontal equity restriction on the problem of finding the optimal utilitarian tax mix. The horizontal equity constraint requires that individuals with the same ability have to pay the same amount of taxes regardless of their preferences for leisure. Contrary to normal findings, we find that a good that is complementary to leisure can be encouraged by the tax system and that a good that normally should be discouraged by the tax system can be subsidized even if the economy is composed of only two private commodities plus leisure. Also, the marginal effective tax rate can be different from zero at the top of the ability distribution when the tax mix obeys the horizontal equity constraint.     

Monetary policy in a financial crisis

What are the economic effects of an interest rate cut when an economy is in the midst of a financial crisis? Under what conditions will a cut stimulate output and employment, and raise welfare? Under what conditions will a cut have the opposite effects? We answer these questions in a general class of open economy models, where a financial crisis is modelled as a time when collateral constraints are suddenly binding. We find that when there are frictions in adjusting the level of output in the traded good sector and in adjusting the rate at which that output can be used in other parts of the economy, then a cut in the interest rate is most likely to result in a welfare-reducing fall in output and employment. When these frictions are absent, a cut in the interest rate improves asset positions and promotes a welfare-increasing economic expansion.     

Is money an omitted variable in the production function? Some further results

In recent years, numerous studies have emphasized the role of real balances in the production function in terms of money being useful: as an intermediate good; as liquid reserves for investment; and also serving as a link between aggregate supply and the nominal interest rate. In this paper we report new Canadian empirical evidence regarding the important role of money in the production process of aggregate manufacturing industries based on a flexible translog cost function approach. In general, our results support the hypothesis that money is an important factor in the production function and that there are potential supply side effects of a change in the interest rate.     

An Incomplete Markets Explanation of the Uncovered Interest Rate Parity Puzzle

A large literature attributes failure of uncovered interest rate parity (UIP) to the existence of a time‐varying risk premium. This paper presents a mechanism in a simple two‐country two‐good endowment economy with incomplete markets that generates sizeable deviations from UIP. In a parameterization where international wealth effects are important, liquidity constraints on an internationally traded bond and agents’ strong resulting precautionary motives successfully generates a time‐varying risk premium: countries that have accumulated large outstanding external positions have, being closer to the constraints, stronger precautionary motives and their asset carries a risk premium.     

OPTIMAL INCOME TAXATION,DYNAMIC EFFICIENCY,AND THE SOCIAL COST OF PUBLIC EXPENDITURE*

An interest income tax and a publicly provided private good are introduced into the Hamada overlapping-generations model consisting of heterogeneous individuals where the government can use a wage-income tax, an identical lump-sum transfer, and the public debt. Two interesting problems are studied: (a) what relation exists between the optimal interest rate and the population-growth rate and (b) how dynamic efficiency affects the optimal-decision rules of taxes and the publicly provided good. We show that (i) if the government can (not) tax the interest income, then the optimal interest rate is (not) equal to the population-growth rate, (ii) without the availability of the interest tax the difference between these two rates is mainly caused by the income-distribution effect of the public debt and (iii) the dynamic efficiency effects on the optimal rules of the wage tax and the publicly provided good depend on not only such a difference but also the average substitute-complement relations among leisure, the second-period consumption and the publicly provided good.     

Human capital use,innovation, patent protection,and economic growth in multiple regions

We provide the first theoretical analysis of the effects of human capital use, innovative activity, and patent protection, on economic growth in a model with many regions. In each region, consumers have constant relative risk-aversion preferences, there is no human capital growth, and there are three kinds of manufacturing activities involving the production of blueprints for inputs (machines), the inputs themselves, and a single final consumption good. Our analysis generates four results. For any given region, we first describe the balanced growth path (BGP) equilibrium and show that the BGP growth rate depends negatively on the rate at which patents expire. Second, we characterize the transitional dynamics in our model. Third, we determine the value of the patent expiry rate that maximizes the equilibrium growth rate of a region. Finally, we show that a policy of offering perpetual patent protection does not necessarily maximize social welfare in a region.     

Who is afraid of capital mobility? on taxation of labor income and the level of public services in an open economy

This paper deals with the effects of international capital mobility on the taxation of labor income and on the size of the public sector. It employs a model of the labor market where national trade unions set the wage level in their country and national governments set the tax rate of a proportional labor-income tax. The tax revenues are used to finance a public good and unemployment benefits. In this model, competition between the national trade unions caused by international capital mobility leads to full employment, and the governments supply the public good on the first best level. As no unemployment benefits have to be financed, the tax on labor income may decline with the introduction of capital mobility. These tax cuts may even overcompensate the unions for the wage decline.     

Tariff,Growth, and Welfare

We develop a two‐country (Home and Foreign) by two‐good (consumption good and investment good) by one factor (capital) endogenous growth model with international knowledge spillover to study the relationship between an import tariff and economic growth and welfare. First, unlike the past literature, we do not need to make an assumption such that the growth rates between countries are identical in a balanced growth path (BGP). Second, we show that there exists a unique and saddle‐point BGP with both countries being incompletely specialized. Third, a higher import tariff on the consumption good in the domestic country may boost (reduce) the rate of economic growth when the foreign (domestic) country has an absolute advantage in the investment good. Finally, a rise in the tariff rate by one country may improve world welfare under some parameter spaces.     

Is bioenergy trade good for the environment?

We analyze the impacts of bioenergy trade on greenhouse gas emissions using a two-good, three-factor model. Bioenergy is an agricultural good used as a substitute for fossil fuels in industry. Governments tax domestic pollution without international coordination. We assume that northern countries have higher labor productivity than southern ones and that agriculture is less pollution intensive than industry (after taxation). We show that whereas southern countries impose a lower tax rate than northern ones, they do not necessary have a competitive advantage in industry, and that compared to autarky, trade liberalization either increases or decreases worldwide emissions depending on regional comparative advantages.