How Reliable are ORANI Conclusions?*

This paper seeks to systematically review the main criticisms of the ORANI model by developing a graphical version of a two-sector (exportables and nonexportables) miniature ORANI model. This model shows that ORANI results occur because while supply curves in both sectors have similar slopes. the slopes of the demand curves are polar opposites. Furthermore this model shows that results will tend to be more sensitive to variations in supply rather than demand parameters. Experiments using the ORANI model itself verified these findings. These results indicate that some form of sensitivity analysis with respect to assigned parameter values should form an integral part of any ORANI experiment.     

A Structural VAR Model of the Australian Economy

We develop an 11-variable structural VAR for the Australian economy over the period 1980 to 1998. The VAR methodology has only relatively recently been applied in the Australian context, despite its popularity in quantitative macroeconomics internationally. Our model includes an overseas sector which distinguishes between goods and asset markets so as to disentangle the effects of shocks emanating from each source. We utilize our model to dissect the Australian growth cycle into its separate influences and to study the Asian crisis. Throughout there is a strong emphasis upon identifying the impact of monetary policy.     

A Short-Run Econometric Model of the Japanese Wool Textile Industry*

Few models of the Japanese wool textile industry have been constructed, despite the importance of the Japanese as the largest purchasers of Australian wool on a single-country basis. This paper constructs a twenty-five equation, monthly model explaining the flow of material through the various processing stages of the industry from greasy wool imports to fabric production. The model was estimated over the period 1968 to 1976 and its performance in dynamic simulations over the same period was good until 1975 when a cartel was implemented. Forecasts outside the sample period for 1977 were satisfactory. The model demònstrates the role of stocks within the industry and concludes that there exists a lengthy lag in the response of wool purchases to changes in Japan's economic activity.     

Australian Stock Market Volatility: 1875–1987*

This paper investigates the volatility of monthly Australian stock returns over the period 1875–1987. There has been extensive work on this question in the United States, but little with data outside that country. Our analysis centres upon whether the 'stylized facts' regarding returns in the US also hold true for Australia. We find that there are both similarities and differences. There is little evidence for asymmetry in Australian returns but strong persistence of shocks into volatility. What is particularly interesting in the Australian series is the large volatility of the last two decades, an experience not matched in the US data