TRADE OPENNESS: AN AUSTRALIAN PERSPECTIVE

Australia's external trade is relatively low compared with the size of its economy. Indeed, Australia's openness ratio (exports plus imports as a proportion of GDP) in 2002 was the third-lowest among the 30 OECD countries. This paper seeks to understand Australia's low openness by analysing the empirical determinants of aggregate country trade. We present an equation for country openness which explains a substantial amount of the cross-country variation. The most important explanators of openness are population and a measure of distance to potential trade partners. Countries with larger populations trade less, as do countries that are relatively more remote. Furthermore, after controlling for trade policy there is little evidence of a positive correlation between openness and economic development. The openness equation suggests that Australia's level of trade is relatively close to what would be expected. The most important factors in explaining Australia's low openness ratio are its large geographic size and distance to the rest of the world.     

Investigation of the Effects of Disclosure Statements in Rental Car Advertisements

State attorneys general recently proposed mandatory disclosures for rental car advertising. This study investigates the effects of alternate disclosure statements on consumers' beliefs. The results suggest that a shorter disclosure statement may be as effective as the one proposed.     

The Output Effect of a Transition to Price Stability When Velocity Is Time Varying

This paper explores the effect of time‐varying velocity on output responses to policies for reducing/stopping inflation. We study a dynamic general equilibrium model with sticky prices in which we introduce time‐varying velocity. Specifically, we endogenize time‐varying velocity into the model developed by Ireland (1997) for analyzing optimal disinflation. The nonlinear solution method reveals that, depending on velocity, the “disinflationary boom” found by Ball (1994) may disappear even under perfect credibility and that early output losses may be much larger than previously thought. Indeed, we find that a gradual disinflation from a low inflation may even be undesirable.     

OBESITY AND NUTRIENT CONSUMPTION: A RATIONAL ADDICTION?

Recent research shows that the dramatic rise in obesity in the United States is due more to the overconsumption of unhealthy foods than underactivity. This study tests for an addiction to food nutrients as a potential explanation for the apparent excessive consumption. A random coefficients (mixed) logit model is used to test a multivariate rational addiction model. The results reveal a particularly strong addiction to carbohydrates. The implication of this finding is that price-based policies, sin taxes, or produce subsidies that change the expected future costs and benefits of consuming carbohydrate-intensive foods may be effective in controlling excessive nutrient intake. ( JEL D120, I120, C230)     

Winner-Loser Reversals in National Stock Market Indices: Can They be Explained?

This article examines possible explanations for “winner-loser reversals” in the national stock market indices of 16 countries. There is no evidence that loser countries are riskier than winner countries either in terms of standard deviations, covariance with the world market or other risk factors, or performance in adverse economic states of the world. While there is evidence that small markets are subject to larger reversals than large markets, perhaps due to some form of market imperfection, the reversals are not only a small-market phenomenon. The apparent anomaly of winner-loser reversals in national market indices therefore remains unresolved.