Price Expectations and the Australian Price Level: 1901–30*

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.     

Rational Expectations and the Defris-Williams Inflationary Expectations Series*

This paper evaluates the Defris-Williams inflationary expectations series as a measure of rational expectations for the period 1973(1) to 1980(2). The results show that the series violates the rationality criterion, being an inefficient and biased predictor of inflation. By constructing an ‘information-augmented’ D-W series, the quantitative importance of omitted information available to consumers at the time of making their forecasts is isolated. The key omitted economic variables are found to be lagged monetary growth and unemployment or an indexation dummy which explains 70 percent of the forecast error of the D-W series. These results suggest that a theoretically constructed expectations series may prove to be a superior measure of market expectations of inflation in Australia.     

理性预期和适应性预期股价模型的比较研究

本文首先介绍了理性预期股价模型和适应性预期股价模型 ,并对两种模型的定价方法和实证分析结果进行了比较 ,得出了较理性预期模型而言 ,适应性预期模型对于成熟股票市场有更强的解释能力 ,结论对我国股市有一定借鉴意义。     

Experience Goods, Expectations and Pricing*

This paper studies a peculiar problem involved in the pricing of an 'experience good' whose value is not known to consumers until it is actually consumed It shows that the producer faces an expectational problem that does not arise in the framework of a 'search good'. Noticing a link between markets in earlier and later periods due to the expectational problem, the present paper analyzes equilibrium price patterns when a producer can precommit to a certain future price path and when he cannot It also discusses social welfare implications.     

Expectations Heterogeneity and Excessive Price Sensitivity in the Land Market

This paper analyses price behaviour in the land market in which the Walrasian auctioneer is absent. Sellers are informed about the land value and post their asking prices; buyers are uninformed, have different opinions, and decide whether or not to accept the sellers' offers. In this market, sellers are price-makers with probabilisitic market power : they can influence the sale probability through their asking price. Price may be excessively sensitive to unexpected changes in market conditions. Moreover, buyer heterogeneity may accentuate the excessive price sensitivity. It has been shown that, the more heterogeneous their opinions, the more sensitive are prices.
JEL Classification Numbers: D40, D43, D82, D84, E44, G12.     

Rational Expectations and Price Determination in the US Oats Market

This paper develops a simultaneous rational expectations model of the US oats market Consistent estimates of the structural parameters are obtained by the instrumental variables method and 15 of 16 parameter estimates are significant at the 5 per cent level Estimated elasticities suggest that hedged stocks are more responsive to price changes than unhedged stocks, and that consumption demand for oats is more responsive to income changes than to changes in price. Post-sample forecasts of the spot price derived from this model are employed to test the semi-strong form efficient markets hypothesis (EMH), although the futures price outperforms the model as a predictor of the spot price. Hence the EMH cannot be rejected     

Analyzing Income Distribution in Australia*

This paper contains an analysis of the sources of income inequality in Australia, based on data from the ABS income survey for 1978-79. The analysis proceeds by progressive decomposition of the population into component groups differentiated by characteristics such as sex, age, employment status and occupation. At each stage of the decomposition, total inequality is partitioned into contributions from within and between the component groups, as measured by the Shorrocks Iq index. The importance of the characteristic in question as a source of inequality can then be assessed. While the results of the analysis are described in some detail, the emphasis of the paper is primarily methodological.     

Price Dynamics in Repeat-Purchase Markets*

A retail market in which customers repeat purchase is modelled. When customer movement between firms is sluggish, price overshooting characterizes firms' optimal response to demand or cost shocks. Thus retail prices would be predicted to be more variable than wholesale prices, a prediction at variance with empirical evidence. Uncertainty in demand and customer imperfect information are introduced into the model to attempt to reconcile this inconsistency between theory and evidence. The introduction of demand uncertainty actually increases the magnitude of price overshooting. By contrast, the introduction of imperfect customer information reduces the variability in retail prices.     

Wage Determination In Australia*

This paper examines whether a stable expectations-augmented Phillips curve exists for Australia. High real wages in the face of continuing high unemployment over the past decade have led to suggestions that the level of unemployment has little effect on wage determination, with the bargaining process taking place between employers and those employees in ‘secure employment’. Results from aggregate data suggest that the level of unemployment is relevant to wage determination. In addition, the impact of overtime on the growth in money wages is consistent with the view that those in secure employment are influenced by labour market conditions.     

Fiscal Policy,Expectations, and Exchange-Rate Dynamics*

This paper uses the sticky-price monetary model to analyze the effects of fiscal policy on the exchange rate under alternative assumptions about exchange-rate expectations. the use of different expectations mechanisms-specifically the perfect-foresight model and the popular models tested by Frankel and Froot: regressive, adaptive, and distributed-lag-is based on recent empirical evidence suggesting that exchange-rate expectations may not be rational. the most surprising finding in the paper is that with adaptive and distributed-lag expectations, fiscal expansion has no initial impact on the exchange rate, and the same may be true for regressive expectations.     

The Youth Labour Market in Australia*

This paper uses unit record data from the 1985 Australian Longitudinal Survey to review the major features of the youth labour market. It is shown that education plays an important role in determining the incidence of unemployment, wages, hours of work and access to training opportunities. Analyses of labour market dynamics indicates that the probability of leaving unemployment falls off substantially as the duration of the unemployment spell increases. A major conclusion of the paper is that the longer term unemployed appear to be segmented from other labour market participants. An implication of this finding is that there b very little which the longer term unemployed can do at the margin to influence their success other than adopt the most productive method of job search.     

Immigrant Generation and Income in Australia*

Microdata for adult men from the 1981 Australian Census are used to study the determinants of income by immigrant generation. The overseas born, 30 per cent of adult males, have 5 per cent lower incomes than the native born, and ceteris paribus, 7 per cent lower incomes. Schooling and pre-immigration labour market experience have smaller effects for the overseas born. Among the Australian born, those with overseas-born parents have 4 per cent higher incomes overall, but, ceteris paribus, there is no difference. The means and partial effects of the explanatory variables among the native born are not related to the parents' nativity.     

Skilled Immigration and Wages in Australia*

This paper investigates the impact of the relative growth of skilled migration on the structure of Australian wages. Unlike conventional approaches, the present study uses macro data to examine the response of wages to immigration flows. We use instrumental variable techniques to control for the potential endogeneity of immigration. The results, using alternative estimation strategies, are consistent with the dominant findings from existing empirical work. There is no robust evidence that a relative increase in skilled immigrants exerts any discernible adverse consequences on the wage structure in Australia.     

Australia and the Pacific Economy*

The industrialization and growth of East Asian countries has shifted the centre of world trade and economic activity towards the Pacific. There has already been a huge redirection of Australia's trade and external economic interests towards the region, based importantly on the emergence of Japan as a major economic power. Australia's future economic prospects will be significantly determined by how it manages its trade policy interests in the context of continuing East Asian industrialization. The most promising Australian trade policy approach is one which allies Australia's trading interests to those of East Asian countries in seeking to maintain an open non-discriminatory trade regime, supportive of the transformation of trade specialization necessary to the industrialization of resource-deficient countries, and which marries that objective to the liberalization of her own and Pacific country markets.     

Life-Cycle Consumption under Rational Expectations: Some Australian Evidence*

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.