ESTIMATING SOURCES OF FLUCTUATIONS IN THE AUSTRALIAN WOOL MARKET: AN APPLICATION OF VAR METHODS

Vector autoregression (VAR) methods are used to analyse the contribution of supply, demand and policy shocks to unpredictable fluctuations in the market for Australian wool. VAR procedures are compared with conventional structural econometric models as methods for decomposing sources of instability. While each has advantages and disadvantages, VAR procedures might be viewed as preferable when the underlying market structure is complex and uncertain, as it is in the case of wool. Based on the results obtained, demand shocks are the dominant source of uncertainty in the wool market in the absence of Australian Wool Corporation intervention, but intervention has blunted their effects, reducing market uncertainty and increasing the average level of prices and revenues.     

Friend or Foe?— Farmer Perceptions of Biotechnologh1

This paper is the result of survey investigation the attitudes of Western Canadian farmers toward two biotechonological products, ENFIX-L and PB-50. Farmers were asked to rate both the importance and the performance of 21 attributes of the products. Soil depletion was found to be an important concern to many farmers. personal and environmental risks were less of a concern. Overall, it was found that the non-biotech-nological aspects of a product would prevail in purchasing decisions.     

Investing in Health: A Macroeconomic Exploration of Short-Run and Long-Run Trade-Offs

This paper aims to unravel the competing effects of health investment. It explores, both analytically and numerically, the equilibrium shift and transitional dynamics after a one-time policy of health investment. We find that such a policy improves health status in the long run, but harms economic growth in both the short- and long-term. The relative sizes of these competing effects depend on the specific health parameters. Within the plausible range for the value of health relative to consumption, households gain welfare in the long run as long as the effectiveness of labor in health production is large. The expanded health sector policy makes households worse off only if labor is rather unproductive in producing health and if households value health relatively little. Nevertheless, the findings challenge the policy recommendations of the World Bank (1993) and World Health Organization (2001) in that good health does not necessarily increase the productivity of workers and the economic growth rate. We hope that the relative simplicity of our model, compared to the existing theoretical literature, can help close the gap between formal academic work on this topic and actual debates among policy makers in both developed and developing countries.     

Macroeconomic stabilization through monetary and fiscal policy coordination: Implications for European Monetary Union

In a two-country model, we consider the implications of monetary and fiscal policy coordination for macroeconomic stabilization. We show that the optimal regime is one of monetary and fiscal policy coordination under flexible exchange rates. In the context of the European Community, this suggests that the desire to fix exchange rates may not be costless. In addition, we show that fiscal coordination requires a relatively high degree of flexibility in fiscal policy. This result suggests that limits on the flexibility of fiscal policies, as suggested in the Delors Report, may hinder macroeconomic stabilization.     

Testing for non-linear dependence in inter-war exchange rates

Testing for Non-Linear Dependence in Inter-War Exchange Rates. — This paper tests weekly inter-war floating exchange rate data for the pound-dollar, pound-franc and pound-reichsmark for non-linearity. Initial tests reveal strong evidence of generic non-linearity in these series and indicate neglected non-linear structure in the residuals of linear representations. Attempts to model this structure using GARCH residual processes have only been partially successful. Thus, two parametric models of such non-linearity were estimated. Comparing the forecasts from these models shows the mean square forecast errors of linear-GARCH and bilinear models to be lower than those from linear forecasts for all series, and that SETAR model forecasts outperform all other models for the pound-dollar.