ECONOMETRIC ISSUES IN MACROECONOMIC MODELS WITH GENERATED REGRESSORS

Abstract. The paper critically reviews the literature on the econometric issues raised by the use of generated regressors (GR) in empirical models. The economic rationale for the use of GR is considered, with examples being drawn from several macroeconomic examples, including New Classical Macroeconomic (NCM) models which postulate monetary ncutrality. Various estimation methods are discussed for models which include 'surprise' or 'unexpected' terms and the strengths and weaknesses of each approach are investigated. Drawing upon the work of McAleer and McKenzie (1991b), situations where the typically inefficient two-step estimation (2SE) method will be efficient are highlighted. Problems of model misspecification and measurement errors are also investigated. An empirical section highlights some of the dangers of using uncorrected 2SE estimation results through a careful consideration of many recent attempts to test the NCM monetary neutrality hypothesis.     

Interest Rate Derivatives in a Duffie and Kan Model with Stochastic Volatility: An Arrow-Debreu Pricing Approach

Simple analytical pricing formulae have been derived, by different authors and for several derivatives, under the Gaussian Langetieg (1980) model. The purpose of this paper is to use such exact Gaussian solutions in order to obtain approximate analytical pricing formulas under the most general stochastic volatility specification of the Duffie and Kan (1996) model. Using Gaussian Arrow-Debreu state prices, first order stochastic volatility approximate pricing solutions will be derived only involving one integral with respect to the time-to-maturity of the contingent claim under valuation. Such approximations will be shown to be much faster than the existing exact numerical solutions, as well as accurate.     

Biotechnology regulation as symbolic normalization

In the “risk” controversy around agricultural biotechnology, at stake is the legitimay of this innovation, particularly the release of genetically modified organisms (GMOs). It has faced potential obstacles to R&D and an eventual market for products. In response, risk management institutions have been designed to anticipate hypothetical hazards; to overcome the perceived abnonnalip of GMOs; to avoid political protest; and to standardize safety criteria. In the UK and its EC framework, process-based legislation has had a precautionay content, designed to consider a broad range of ecological uncertainties which could be translated into technical evidence of safety. Given that all stages of risk management entail environmental value judgements, its procedures bear some potential for greater public involvement. Since process-based replation was enacted in 1990, industy has attacked it for hindering the commercial competitiveness of the European biotechnology industy. This attack more likely aims to limit the precautionay content, to normalize GMOs, and to preclude democratizing risk assessrnen—though at the risk ofjeopardizing its public credibilip. These dilemmas o f risk management arise from its implicit role in legitimizing a contentious form of techno-scientific progress.     

EXPLAINING THE UNITED STATES' INDUSTRIAL GROWTH, 1860–1991: ENDOGENOUS VERSUS EXOGENOUS MODELS

This paper considers the historical record and time series properties of United States' industrial production for the period 1860 to 1991, utilizing unit root tests and measures of persistence. The results identify a segmented trend model which is used to assess the time-series simulation performance of four well-known models of economic growth: Solow (1957); Mankiw, Romer and Weil (MRW, 1992); Barro and Sala i Martin (BSM, 1992); and Rebelo (1991). Both the MRW and BSM models dominate the Solow model in accounting for twentieth century industrial growth, highlighting the importance of human capital, and the paper suggests a new measure related to higher education. However, the Rebelo model explains the post-1973 slowdown more successfully than either of the 'augmented-Solow' approaches. The paper concludes with a discussion of the impact of shocks on US industrial growth.     

Beyond ‘chalk and talk’: educator perspectives on design immersion programs for rural and regional schools

Twenty-first century education needs to be re-envisioned to equip citizens for a lifetime of rapid change and complexity. Design has been proposed as a pedagogical framework that develops the required foundational literacies, competencies and character qualities citizens need to thrive in this new creative knowledge economy. However, widespread adoption will require systemic transformation of practice, and recognition of the value of formal and informal ‘connected’ learning environments and experiences. This paper explores the potential of design immersion outreach efforts in fostering design capabilities and building educators’ pedagogical repertoires to support twenty-first century learning. It documents educators’ experiences of goDesign, the first three-day place-based travelling design immersion experience for regional and rural Australian high school students and teachers. Drawing on observational data, and in-depth interviews with participating principals (n?=?3) and teachers (n?=?14) from six regional schools, educators believed goDesign provided new ideas for their classroom practice. They felt it broadened horizons for both themselves and their students, through: personally inspiring experiences and career aspiration; engagement in design thinking process, skills and mindset; and providing a valuable opportunity for community building. As educators in regional and rural areas often experience geographical, social and professional isolation, this paper argues that place-based informal design immersion programs might be an innovative way to engage and educate both students and teachers with design, thus building the competencies required for successful twenty-first century futures.