The Macroeconomic Outlook

A slow recovery, commencing in the December quarter of 1997, is expected from the current recession. Overall, gross domestic product (GDP) may increase by 2.8 per cent in the year to the June quarter of 1992, and continue to increase at a similar rate thereafter.
This subdued recovery is likely to see the unemployment rate at over 70 per cent to the end of 1992, before moving down slowly to around 8.5 per cent by the mid-1990s.
Consumer price index (CPI) inflation may fall sharply from a peak of 8.0 per cent in 1989-90 to a trough of under 3 per cent in 1997-92, due to the recession and movements in oil prices. With a slow recovery, inflation may then increase to 5 per cent per annum in the medium term.
The current account deficit has fallen from 6.0 per cent of GDP in 1989-90 to 4.7 per cent in 1990-91, despite a fall in the terms of trade of 5 per cent. However, this has been due to the cyclical downturn. With a slow recovery in demand, and rising real labour costs hampering expansion in export and import-competing industries, the current account deficit may once again reach 6 per cent of GDP by the mid-1990s, implying steady increases in the foreign debt-to-GDP ratio.
This forecast assumes monetary policy targets an inflation rate of 5 per cent per annum. Any further easings in monetary policy may undermine the credibility of the inflation objective with the result that the trade weighted index (TWI) exchange rate may drop sharply from 59.     

The Economic Situation

Throughout the first nine months of 1976 the Australian economy has remained virtually stagnant, with output and employment increasing only marginally and unemployment rising also. With the government following a severely contractionary policy in an attempt to break inflation the economy seems poised for a further modest downturn in the next nine months so that a self-sustaining recovery from the current recession does not seem to be in prospect before the second half of 1977. On the basis of existing policies our forecasts indicate a rate of growth of real GDP of only about 1.0 per cent in 1976–77, implying a further significant rise in unemployment during the financial year. There have been some hopeful signs in recent months of a reduction in inflation — the consumer price index increases in the first three quarters of 1976 were modest and wage rate increases remain closely in line with the wage indexation guidelines — but three factors have emerged to cast doubt on whether this improving trend will continue. The first is the effect of the recent drought on prices of foodstuffs, particularly meat, and the second is the expected 1.5 to 2.0 per cent increase in the consumer price index as a result of the changes in the method of financing hospital and medical services. These two factors mean that the December quarter increase in the consumer price index may be more than 5 per cent, threatening a further stimulus to inflation in 1977. Thirdly, present government policies could easily lead to a breakdown of the wage indexation system and a return to some form of collective bargaining over wage rates. Assuming nevertheless, a de facto continuation of partial indexation in 1977, we expect increases in male award wages and male average earnings of about 13 per cent during 1977, these increases being similar to those during 1975 and 1976 but much below the increases of 36 per cent and 28 per cent respectively recorded during 1974. Our forecasts also indicate increases in the consumer price index of 14 per cent during 1976 and 11 per cent during 1977, following increases of 16.3 per cent and 14.0 per cent during 1974 and 1975 respectively. These forecasts indicate that the government's fiscal, monetary, exchange rate and wage policies are likely to come under heavy challenge early in 1977, and decisions taken at that time are likely to be major determinants of economic developments in Australia in the next few years. The Institute would again urge a shift to a co-operative package including full wage indexation, with cuts in indirect taxes and public sector charges to wind down inflation and expand the economy. On current indications, labour productivity will be no higher in 1976–77 than in 1973–74, because of the weakness of total output, so that the whole burden of wage increases in that three year period has fallen on unit costs of production. It is our belief that the twin problems of inflation and unemployment will only be defeated in Australia when both cuts in indirect or direct taxes and increases in productivity are applied to reducing inflation in the context of an orderly system of wage and price determination.     

A multivariate time series analysis of the United States aggregate production function

This study examines the effects of hours of work per unit of private sector capital, the relative price of energy, government capital per unit of private sector capital, and inflation on private sector output per unit of capital in the U.S. over the period 1952–90. A small vector autoregressive model that comprises the variables typically employed in single-equation estimates of the aggregate production function is used. Variance decompositions and cumulative impulse response functions indicate that hours of work per unit of private sector capital, the relative price of energy, and the inflation rate have significant effects on private sector output per unit of capital over the 1952–90 period. However, there is no evidence of a significant effect for government capital per unit of private capital. An historical decomposition that begins in 1973 with the emergence of a “productivity slump” and continues through 1990 indicates that shocks to hours of work per unit of capital, the relative price of oil, and inflation appear important in explaining output per unit of capital but shocks to government capital are not important.     

The Australian Economy after Devaluation

Before taking account of the measures announced by the government on and after 28 November 1976, the latest statistical information suggests that the economy was broadly on the course outlined in detail in Review 3'76. Both business investment and consumer demand appear to have fallen in real terms, seasonally adjusted, in the last few months. With public sector demand also weak the economy was moving Into a new period of modest decline in overall activity, so that real non-farm GDP was expected to grow by 1 to 2 per cent in 1976–77 and by only 1 per cent in calendar 1977. The rate of inflation has moderated in the first three quarters of 1976 and, in spite of the large increase in the consumer price index expected in the December quarter and the granting of full percentage wage indexation for the September quarter, the rate of inflation seemed likely to be lower in 1977 than in 1976.     

Australian Capital City Real House Prices, 1979–1993

Real house prices have increased by 35 per cent in Australian capital cities during the last 15 years, with Brisbane, Canberra, and Sydney experiencing rises of 48 to 61 per cent and Adelaide, Melbourne and Perth having increases of 20 per cent or less. This article estimates a single model for the six cities to explain the divergent real price behaviour over time and space. It is concluded that the fundamental forces driving real house prices are the growth rate in real wage income (primarily due to employment growth) and the growth in population caused by net overseas migration.     

PoJjcy and the Australian Economy, 1977

At the end of the first quarter of 1977 the available economic indicators, while as usual far from univocal, still give cause for serious concern about the health and direction of the Australian economy. With no significant expansionary factors operating in the economy in 1977 other than the revival in the mining industry and in some aspects of business investment, and the various arms of economic policy being set almost entirely in a restrictive stance, aggregate output would appear to be either flat or declining modestly at the present time. On the basis of a continuation of present policies we would anticipate growth in real non-farm GDP of only 2 to 3 per cent in both 1976–77 and 1977–78, with unemployment continuing to increase until well into 1978. Given the stimulus to inflation arising from the 1976 devaluation and from the wage effects of the Medibank changes, the rate of increase in the consumer price index would seem likely to be 14 to 15 per cent in 1977, even if a partial wage indexation policy could be sustained and whether or not a one quarter wage/price deferment comes into effect. But government pressure on the Arbitration Commission for a reduction in real wages has placed the wage indexation system in jeopardy, and there is now considerable uncertainty about the methods of wage fixation which will obtain in 1977–78. This article surveys some aspects of recent developments and considers some policy options available to the government.     

Sectoral variability and the foundations of optimal inflation rate

The recent monetary search models argue that the real effects of inflation on economic activity can be gauged through relative price variability (RPV). Our study uses a large panel data of 32 developed and emerging European economies to test the relationship between inflation and RPV. We use a panel threshold model to explore the regime-specific effects of inflation on RPV. Our results confirm a non-linear profile of the relationship between inflation and RPV. Consistent with the monetary search models, our results show that the effects of inflation on the RPV are more significant in its low (below 0.792% per annum) and high (beyond 2.064% per annum) regimes. Finally, we also report a strong moderating role of central bank independence (CBI) in the inflation–RPV relationship.     

The Macroeconomic Outlook

This quarterly two-year forecast from the Access Economics Murphy (AEM) model updates that presented in the corresponding article in the 4th quarter 1991 issue of the Australian Economic Review.
As predicted in the previous forecast, the economy entered a slow recovery in the December quarter of 1991. Steady growth averaging close to 1 per cent per quarter is likely during 1992–93 and 1993–94.
Unemployment may peak at around 10 3/4 per cent in mid-1992, before slowly falling to a year-average level of around 9 per cent in 1993–94.
Under the influence of the recent recession, CPI inflation is likely to be around 2 per cent per annum on a year-on-year basis for both 1991–92 and 1992–93. With economic recovery, it is forecast to rise to 4.5 per cent per annum in 1993–94.
While the recession has helped bring the current account deficit down from near 6 per cent of GDP in 1989–90 to around 3 per cent for 1991–92, it will rise with economic recovery, and is forecast to exceed 5 per cent of GDP by 1993–94, compared with a sustainable level of 3 to 3 1/2 per cent.
The economic recovery is not proving to be as strong as forecast in One Nation.
However, there is a recovery clearly underway, and any further easing of monetary and fiscal policy risks prejudicing a substantial part of the recent impressive gains on inflation and creates a major medium-term problem for public finances.     

Australian Art Market Prices During the Global Financial Crisis and Two Earlier Decades

This study constructs a quarterly hedonic price index using 64,203 artworks, by seventy‐one well‐known modern and contemporary Australian artists, sold at auction houses over the period 1986–2009. The hedonic regression model includes characteristics such as name and living status of the artist, the size and medium of the painting, and the auction house, quarter and year in which the painting was sold. The resulting index indicates that returns on Australian fine‐art averaged one per cent in nominal terms over the period from quarter 1 1986 to quarter 4 2009 with a standard deviation of seventeen per cent. During the global financial crisis spanning quarter 1 2008 and quarter 4 2009, the average art returns declined in nominal terms by close to six per cent with a standard deviation of twenty‐one per cent. This study also shows that over the entire period the art market only marginally underperformed the stock and housing markets. The low correlations between these markets suggest the benefits of portfolio diversification.     

住房价格、消费与中国货币政策最优选择:基于异质性房价预期的视角

在异质性房价预期和流动性约束条件下,本文构建了包括家庭消费决策、企业生产决策以及中央银行货币政策决策的理论模型。在此基础上,本文采用混合的RBC-VAR方法和1998年1季度至2010年3季度的数据模拟分析了住房价格、消费和货币政策选择之间的关系。结果表明:预期房价上涨的家庭越多,住房价格波动对消费波动的影响越大;贷款价值比越高,住房价格波动对消费波动的放大效应越强,但经验证据并没有支持这种放大效应;盯住住房价格的货币政策获益很少,其在减少产出波动的同时增加了通货膨胀波动。因此,中国人民银行应遏制房价偏离均衡的上涨,尤其是房价上涨预期,但货币政策不宜盯住住房价格。     

The Macroeconomic Outlook

A slow recovery is expected from the current recession. Since reaching a trough in the September quarter of 1990, real gross domestic product (GDP) has followed a flat path which is likely to continue through to the September quarter of 1991. A slow recovery may then commence in the December quarter of 1991. This is consistent with real GDP growth of -0.9 per cent in 1990-91 followed by 2.4 per cent in 1991-92 and around 3 per cent per annum to the mid- 1990s compared with 'normal' growth of 2.5 per cent per annum.
This recovery is likely to see the unemployment rate at over 10 per cent for most of 1991-92, before moving to around 8 per cent by the mid-1990s.
Inflation may fall sharply from a peak of 8.0 per cent in 1989-90 to a trough of 3 to 4 per cent in 199 1–92, due to the recession and movements in oil prices. With a slow recovery, inflation may increase to 4 to 5 per cent per annum in the medium term.
The current account deficit has fallen from 5.9 per cent of GDP in 1989-90 to a likely level of 4.1 per cent in 1990-91, but part of this gain is cyclical rather than structural. Thus the deficit is expected to increase to around 5 per cent during recovery and remain flat to the mid- 1990s, implying steady increases in the ratio of foreign debt to GDP.
Looser monetary policy would erode part of the forecast sustained reduction in inflation. Looser fiscal policy would lead to a higher current account deficit.     

The Relationship Between Macroeconomic Variables and Relative Price Variability in Greek Agriculture

The purpose of this paper is to present a measure of relative price variability (RPV) among 53 agricultural products and to explore the relationships between RPV, aggregate inflation rate, and changes in economic activity for the period 1962–1997. We also estimate the effects of expected and unexpected components of inflation on price variability. The results show that changes in inflation rate and economic activity have a strong positive effect on RPV, in addition, expected inflation is found to be an important determinant for explaining price variability.     

Convergence clustering in the Chinese provinces: New evidence from several macroeconomic indicators

In this paper, the convergence clustering in 31 Chinese provinces regarding several important economic indicators over the period 1952 to 2016 was empirically investigated. Several provincial clusters were identified in the per capita (real) gross domestic product (GDP), consumption–income ratio, retail price, and consumer price inflation rates, using a club convergence and clustering procedure. The empirical findings are as follows. First, it was found that all series of the original data contain a significant nonlinear component. Second, it was observed that there are five significant clusters for the per capita income in China. Third, it was found that there are four significant clusters for the consumption–income ratio. Fourth, it was observed that there are four significant clusters for the retail inflation rates and two significant clusters for the consumer inflation rates in China. These results will enable local and central planners to implement economic growth, savings and price adjustment policies for different groups of provinces.     

The Steady Inflation Rate of Economic Growth

This paper considers the existence of a path of GDP corresponding to steady inflation in the prices of domestic goods. We estimate the steady inflation rate of growth, denoted the SIRG, at a little over 4 per cent p.a. in the post-float period in Australia. Changes in inflation are modelled as a nonlinear combination of growth and changes, in import price inflation. Because import price inflation is more volatile than overall inflation, policy that targets overall inflation may require growth to fluctuate considerably, whereas growth can be steady if the target is steady inflation of domestic goods' prices.     

An Application of Quah and Vahey’s SVAR Methodology for Estimating Core Inflation in India: A Note

Inflation, calculated as year-on-year per cent change in general price level, represents a combined effect of several types of price changes. The monetary authorities primarily focus to track that part of inflation, which can be effectively monitored and controlled using various monetary instruments. This persistent component of inflation is termed as ‘Core Inflation’, which possesses long-run properties as well as predictive power to forecast inflation. This paper makes use of Quah and Vahey’s definition of core inflation as that component of headline inflation, which has no impact on output in medium to long run and estimates it by placing restrictions on vector auto regression system with inflation and output growth. The analysis is based on monthly data from April 1995 to January 2009. Empirical results showed that in India, during 2006 and 2007, the inflation process was stronger than what headline inflation figures actually depicted and in 2008 the inflationary process has tended to be somewhat weaker than what was observed in headline inflation.

     

美元贬值对中国通货膨胀的影响:传导途径及其效应

本文结合有向无环图方法(DAG)及结构向量自回归模型(SVAR),分别从成本推动渠道、资金输入渠道和货币扩张渠道就美元贬值对我国通货膨胀影响的传导途径及其效应进行了实证研究。分析表明,由成本推动渠道,美元贬值会迅速带动我国工业品出厂价格上涨,能源价格、食品价格和金属价格的传导效应都很显著,而推动我国居民消费价格走高则存在一定时滞,主要依赖食品价格传导。此外,国际大宗商品价格上涨对我国通货膨胀的影响更侧重于生产领域。由资金输入渠道,美国联邦基金利率走低和美元指数下滑会带动国内商品房销售价格和资本市场价格的结构性上升,进而拉动我国通货膨胀,其中以市场利率和短期资本流动传导尤为显著。由货币扩张渠道,美元贬值对我国工业品出厂价格的影响更为显著,货币扩张主要通过外汇占款和人民币升值预期对我国通货膨胀产生影响,且以对消费领域的影响较为明显。本文的研究显示,我国当前承受着较大的输入型通货膨胀压力。     

Inflation, Unemployment and the NAIRU in Australia

In this paper we investigate the relationship between inflation and unemployment in Australia, post 1959. Our approach is based on identification of the time series components of the data. Evidence is found of significant correlations between the non-trend frequencies of inflation and unemployment and these correlations are exploited to estimate a simple forecasting model that does not suffer from the instability normally associated with the Phillips Curve. Estimates of the NAIRU are also provided and these range from as low as 2.3 per cent to as high as 9.2 per cent over this period, but these estimates are quite imprecise. Reasons for this imprecision are discussed.     

Evidence on the effects of inflation on price dispersion under indexation

Distortionary effects of inflation on relative prices are the main argument for inflation stabilization in macro models with sticky prices. Under indexation of non-optimized prices, those models imply a nonlinear and dynamic impact of inflation on the cross-sectional price dispersion (relative price or inflation variability, RPV). Using US sectoral price data, we estimate such a relationship between inflation and RPV, also taking into account the endogeneity of inflation by using two- and three-stage least-squares and GMM techniques, which turns out to be relevant. We find an effect of (expected) inflation on RPV, and our results indicate that average (??trend??) inflation is important for the RPV?Cinflation relationship. Lagged inflation matters for indexation in the CPI data, but is not important empirically in the PPI data.     

国际资本流动对房地产价格的影响——基于我国的实证检验(1998-2006年)

本文在考虑通货膨胀的条件下,利用我国1998-2006年的实际利用外资和房地产价格的季度数据建立误差纠正模型(ECM),使用Granger因果检验方法对我国的房地产价格和国际资本流动的关系进行实证检验.得出结论,短期而言,房地产价格上涨吸引了外资的流入;长期来说,外资的流入对我国的住房价格上涨产生了影响.在现阶段控制外资过度流入房地产市场,有利于保持我国房地产价格的稳定.