Modelling the Allocation of Australian Bilaterial Aid: A Two-Part Sample Selection Approach*

This paper focuses on the allocation of Australian bilateral aid to developing countries. It simultaneously models the determination of potential recipients' eligibility for Australian aid and the amounts of aid that eligible countries receive. A variant of the econometric technique developed by Lee and Maddala (1985) is utilized. The results obtained indicate that the decisions underlying the allocation of Australian bilateral aid generally seem consistent with the humanitarian, commercial, political and strategic motives underlying the aid program as a whole.     

LINKAGES BETWEEN EXCHANGE RATE POLICY AND MACROECONOMIC PERFORMANCE

Using a sample of 104 countries, we study macroeconomic performance from 1973 to 2007. We examine GDP growth, inflation rate, growth volatility and inflation volatility, and their response to a ‘words versus deeds’ measure of exchange‐rate policy, which is obtained by interacting a country's de jure and its de facto policy. For non‐industrialized countries, the highest growth rates and the lowest inflation volatility are associated with countries that pursue fear of floating policy, whereas countries that pursue a matched float policy (de jure and de facto floating) have the highest inflation rates but the lowest GDP volatility.     

WATER SUBSIDIES, WATER TRANSFERS, AND ECONOMIC EFFICIENCY

Water pricing subsidies and restrictions on water transfers are integral features of federal water supply policies in the western United States. Critics claim that these features discourage efficient use of water. However, current analyses ignore an important feature of federal water supply contracts: entitlement ceilings. This paper analyzes the implications of entitlement ceilings for federal water policies and several proposals for policy reform, including eliminating transfer restrictions, reducing pricing subsidies, and imposing groundwater pump taxes. Analysts may overstate both the efficiency losses resulting from Bureau policies and the amount of water that would be freed up from agriculture if the proposed policy reforms were instituted.     

World Agricultural Trade Reform: Implications for Australia

In this paper we assess the implications of agricultural trade reform by GATT member countries. To do this, we link two general equilibrium models, a world food trade model and the ORANI model of the Australian economy. By treating the ORANI model as an integral part of the world model, we are able to focus on the implications for Australia of world agricultural trade reform.
The findings suggest that, if price distorting agricultural policies were removed by GATT member countries, world food commodity prices would rise, some by up to 30 per cent, and world food trade expand by about a third. Australia would be a major beneficiary of these international developments, the value of its agricultural exports rising by close to 15 per cent. In 1986, this would have meant for Australia additional export earnings of around SUS750 million, as well as more rapid economic growth.     

Liquidity Requirements,Free-Riding,and the Implications for Financial Stability Evidence from the Early 1900s

Maintaining sufficient liquidity in the financial system is vital for its stability. However, since returns on liquid assets are typically low, individual financial institutions may seek to hold fewer such assets, especially if they believe they can rely on other institutions for liquidity support. We examine whether state banks in the early 1900s took advantage of relatively high cash balances maintained by national banks, due to reserve requirements, to hold less cash themselves. We find that state banks did hold less cash in places where both state legal requirements were lower and national banks were more prevalent.