TREASURY NOTE AND BANK BILL RATES, THE RISK PREMIUM AND AUSTRALIAN MONETARY POLICY*

This paper examines a link in the Australian monetary transmission mechanism based on the risk structure of certain interest rates. Monthly data on the bank-accepted bill and Treasury note rates reveal a significant reduction in both the mean and variance of the risk premium linking the two rates towards the end of 1989. The two interest rates cointegrate in each of the periods January 1984 to September 1989 and October 1989 to December 1995, though less significantly so in the earlier period, and formal tests indicate that the risk premium was stationary for each of the sub-periods. Well defined error-correction mechanisms suggest that the burden of adjustment to shocks to the money market was shared by the two interest rates. A stationary risk premium, combined with evidence that the Treasury note rate Granger-caused the bank bill rate in both sub-periods, indicates that the Reserve Bank has been able to influence the bill rate by targeting the note rate.     

Options,Taxes, and Ex-Dividend Day Behavior

A novel way of estimating the expected as opposed to the actual share price fall-off is developed using option prices. This method is applied to the UK Traded Options Market using data from 1979 to 1984. The results show that: (a) the average expected fall-off implicit in option prices is around 55 to 60% of the dividend and significantly different from it. The fall-off also varied inversely with the dividend yield, which is consistent with the prediction of the “tax clientele hypothesis.” (b) The estimates of the expected fall-off were not significantly different from the actual fall-off. (c) Finally, the results imply that the usual assumption made in valuing options on dividend-paying stocks, that the fall-off is equal to the dividend, would lead to downward-biased estimates of the option value.     

The Labour Market Impact of the Working Families' Tax Credit

In October 1999, the working families' tax credit (WFTC) replaced family credit as the main package of in‐work support for families with children. Among a range of stated aims, the WFTC is intended to‘… improve work incentives, encouraging people without work to move into employment'. In this paper, we consider the impact of WFTC on hours and participation. To simulate labour supply responses, we use a discrete behavioural model of household labour supply with controls for fixed and childcare costs, and unobserved heterogeneity. In simulation, we experiment with a number of scenarios regarding the take‐up of the credit, entry wage level and hourly childcare price. We find participation rates among single mothers to increase by around 2.2 percentage points for the base‐case scenario, while for married women participation rates are modelled to fall. Our simulation results indicate a small increase in overall participation of around 30,000 individuals.     

Collective Labour Supply: Heterogeneity and Non-Participation

We present identification and estimation results for the "collective" model of labour supply in which there are discrete choices, censoring of hours, and non-participation in employment. We derive the collective restrictions on labour supply functions and contrast them with restrictions implied by the usual "unitary" framework. Using the large changes in the wage structure between men and women in the U.K. over the last two decades, we estimate a collective labour supply model for married couples without children. The estimates of the sharing rule show that male wages and employment have a strong influence on bargaining power within couples.     

Political Leadership and Stadium Development in Chicago: Some Cautionary Notes on the Uses of Regime Analysis

Between 1988 and 1994, Chicago was the site of three major sports stadium projects — the construction of the new Comiskey Park (since renamed US Cellular Field) and the United Center, as well as the addition of stadium‐lighting to the venerable Wrigley Field. This article analyzes the implementation of these projects with the aim of critiquing and reorienting contemporary regime theory. The more particular amendments to typical regime analysis focus on the ‘opportunism’ of political figures in shaping agendas and carrying through projects. The larger suggestions growing from this analysis pertain to the nature of regime theory as a mode of political analysis and, additionally, to a reconceptualization of how regime analysis can be linked to the normative assessment of urban policy.