Interest Rates and the Market for New Light Vehicles

We study the impact of interest rate changes on the demand and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates. Interest rate changes impact the auto market through both households and manufacturers. For the impact of rate changes on price and output growth, the household channel is quantitatively more important. A 100 basis‐point increase in both interest rates causes annual growth rates of production to fall from 1.0% to ?11.0% and sales to fall from 1.0% to ?2.9% in the short run.     

The Value of Imputation Tax Credits on Australian Hybrid Securities

Hybrid securities are becoming an increasingly important component of the capital structure of Australian firms. While displaying characteristics of both debt and equity, one principal equity attribute of hybrids is their ability to pay franked dividends. This enables resident domestic investors to claim corporate tax payments as a credit against personal tax obligations under Australia's dividend imputation tax system. This paper estimates a value for the ‘franking credits’ that attach to hybrid securities by examining stock price changes around ex‐dividend dates. We add to the literature that examines the ex‐day price changes of ordinary shares (OS) in that the hybrid securities we examine have high dividend yields and are relatively insensitive to market movements. Therefore the signal‐to‐noise ratio is much higher than for OS. Our analysis reveals that cum‐dividend day prices on hybrid securities do not include any value for franking credits. This result is consistent with the notion that the price‐setting investor in the Australian market is a foreign investor who places no value on franking credits.     

Forecasting the PSBR Outside Government: The IFS Perspective

Expectations regarding the future state of the public finances are vital for public policy formation. The UK experience has been that forecast of the PSBR have been beset with problems since the mid-1980s. Independent assessments of the accuracy and plausibility of public finance forecasts are an important check on government forecasts and serve to increase public debate over government finance issues. We examine the success of various possible methods available to those outside government. JEL classification: E6, H1, H6.     

Private Opportunity,Public Benefit?

The newly elected Labour government has pledged to ‘reinvigorate the Private Finance Initiative’, as part of the new emphasis on ‘public/private partnerships’ in the delivery of core public services. This article assesses the merits of using private finance to deliver public services against three criteria: whether it will lead to additional investment in social infrastructure, whether it represents good value for the taxpayer's money and whether the use of private finance will reduce the public sector's flexibility to pursue its public service objectives. JEL classification: H54, H11.     

RECENT EVIDENCE ON THE DISTRIBUTION OF AIR POLLUTION EFFECTS

This study associates levels of exposure to ozone and fine particulate matter in the South Coast Air Basin of California with resident income, race, age and education. A Regional Human Exposure Model provides the basis for estimating exposure not only on location or residence, but also on mobility within the Basin and time spent in various activities indoors and outdoors. The results are consonant with earlier research in most respects, except that population density is negatively related to exposure. Ethnic minorities and children receive the greatest exposure levels. The highest income group exhibits a strongly negative association with exposure.