The Effect of Changes in Monetary Policy on Consumer and Business Confidence

This article examines the response of consumer and business confidence to five measures of change in Australian monetary policy. Actual, expected and surprise increases in the official cash rate target and related interest rates are shown to negatively impact consumer sentiment. Business confidence is less affected by increases in the cash rate target, but is negatively affected by an increase in the 90-day bank accepted bill rate. Tests for model stability and asymmetries in the response of sentiment to increases and decreases in interest rates otherwise find only limited evidence for monetary policy having a perverse signalling effect on sentiment.     

Input–Output Structural Decomposition Analysis: A Critical Appraisal

Over the past decade, input–output structural decomposition analysis (SDA) has developed into a major analytical tool. We review the development of SDA and its relationship to other methodologies. We present the fundamental principles of alternative approaches to deriving SDA estimating equations and explore the various decompositions of changes in IO tables. We also identify several complications and unresolved issues. Most importantly, we find that a rigorous grounding in economic theory is lacking for SDA, but we are able to offer some suggestions as to how it might be established.     

An examination of the effects of management earnings forecast form and explanations on financial analyst forecast revisions

Using a sample of 978 quarterly management earnings-per-share forecasts made during the period 1993 to 1999, we document that financial analyst revisions to management earnings forecasts are a function of management forecast form. More precise forecasts (measured three different ways) lead to greater revision of financial analyst consensus EPS forecasts for a given level of unexpected earnings as predicted by Kim and Verrecchia (1991) and Bayesian adjustment models. Also, consistent with our arguments, maximum forecasts are interpreted as bad news by analysts. Our results, while consistent with theory, are inconsistent with recent experimental studies which do not reject the null hypothesis of no effect of management earnings forecast form on the association between unexpected earnings and financial analyst forecast revisions. We also re-examine Baginski, Hassell, and Kimbrough's (2004) finding that attributions used to explain management forecasts affect the reaction to the forecast using analyst data. Consistent with their findings using stock prices, the attribution presence (especially external attributions) increases financial analyst revisions pursuant to management forecasts.     

The take-up of means-tested income support

Many studies have identified that eligible claimants do not participate in means-tested income support programs. We examine the determinants of the decision to take-up social assistance in Canada using the 1997 Canadian Out of Employment Panel dataset. Using a conditional maximum likelihood approach to take account of the potential endogeneity of the level of benefits available to potential claimants, we find that benefit levels and recent receipt of Social Assistance (SA) are important determinants of the take-up decision. The results are important for the fiscal implications of changing benefit levels as the take-up rate is systematically related to the benefits potential recipients are entitled to receive. Further, it suggests that stigma and transaction costs associated with program use are important in explaining the take-up decision.     

Technological convergence, R&D, trade and productivity growth

This paper analyses productivity growth in a panel of 14 United Kingdom manufacturing industries since 1970. Innovation and technology transfer provide two potential sources of productivity growth for a country behind the technological frontier. We examine the roles played by research and development (R&D), international trade, and human capital in stimulating each source of productivity growth. Technology transfer is statistically significant and quantitatively important. While R&D raises rates of innovation, international trade enhances the speed of technology transfer. Human capital primarily affects output through private rates of return (captured in our index of labour quality) rather than measured TFP.     

ANALYZING CULTURAL STEREOTYPES IN MULTINATIONAL BUSINESS: UNITED STATES AND AUSTRALIA

As U.S. business becomes more international, so does U.S. management education. Executive development programmes offer courses in the U.S. and abroad to managers from many nations. As part of the transfer of U.S. management methods, the concepts, techniques and beliefs taught in these programmes may not be easily accepted, especially by foreign managers. Careful examination of cultural differences in attitudes and opinions is a necessary step in the successful transfer of management technology. This paper compares U.S. and Australian managers' values, attitudes, beliefs and opinions on a wide range of topics using a modified version of Schein's Public Opinion Questionnaire. Our findings suggest that there are common business management views as well as national differences among managers in the U.S. and Australia.     

Endogenous market incompleteness without market frictions: Dynamic suboptimality of competitive equilibrium in multiperiod overlapping generations economies

In this paper, we show that within the set of stochastic three-period-lived OLG economies with productive assets (such as land), markets are necessarily sequentially incomplete, and agents in the model do not share risk optimally. We start by characterizing perfect risk-sharing and find that it requires state-dependent consumption claims which depend only on the exogenous shock realizations. We show then that the recursive competitive equilibrium of any overlapping generations economy with weakly more than three generations is not strongly stationary. This then allows us to show directly that there are short-run Pareto improvements possible in terms of risk-sharing and hence, that the recursive competitive equilibrium is not Pareto optimal. We then show that a financial reform which eliminates the equity asset and replaces it with zero net supply insurance contracts (Arrow securities) will implement to Pareto optimal stochastic steady-state known to exist in the model. Finally, we also show via numerical simulations that a system of government taxes and transfers can lead to a Pareto improvement over the competitive equilibrium in the model.