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This paper surveys the Indonesian economy and the drivers of socioeconomic development over the past half‐century. It highlights the country's rapid economic development in the face of unfavourable 'initial conditions'. We examine episodes in economic development, in particular comparing and contrasting the two main sub‐periods, of high economic growth during the authoritarian Suharto era, 1966–98, and moderate economic growth during the democratic era since 1999. The paper emphasises the importance of sound macroeconomic management, economic openness, inclusive social progress and institutional development. For all the challenges that Indonesia faces, and its unfinished reform agenda, the major conclusion is one of development success, broadly defined. [ABSTRACT FROM AUTHOR]

Understanding the determinants of changes in welfare caseloads is an important, but little studied, topic in Australia. This paper evaluates the role of labour market conditions in explaining the changes in the Australian welfare caseload since the late 1990s. The paper employs a stock-flow approach to better control for persistence in welfare receipt and includes different specifications to deal with measurement error in labour market data. The results suggest that the labour market is an important determinant of movements on and off welfare, accounting for the majority of the caseload decline during 1997-2005. The results also highlight the importance of robustness checks when data are measured with error.

This paper analyses gender differences in faculty promotion and mobility at the University of New South Wales (UNSW) using personnel records for 1999-2010. It finds female lecturers less likely than men to be promoted or to leave UNSW and female associate professors more likely to be promoted. These results are consistent with a flipping statistical discrimination model. Leave-taking did not account for gender differences. Instead, taking maternity leave indicates higher likelihood of staying at UNSW and being promoted. The paper finds that gender differences narrowed over time but not always as predicted by gender-related policy changes.

Many elements of Japan's economic stagnation in the 1990s are reasonably well explained in a modern, 'synthesis type', new-Keynesian model. The actual occurrence of some of the elements, such as deflation and zero interest rates, was, however, rare in contemporary experience. As a result there has been a disconnect between what is theoretically understood by economists and the public discourse about Japan's 'lost decades'. The implications for policy are not very controversial in theory - fiscal policy should work and monetary policy could work but not via interest rate transmission. But the length of time that Japan remained below its potential GDP fuelled a debate about the effectiveness of traditional policy measures. This gave rise to real questions about the first 'lost decade' (1991-2001): why didn't policy work? Was this some new mystery ailment for which known remedies were ineffective? These questions are still debated and they remain important because the popular reading of Japan's experience is ill-informed and is being mis-applied to current policy settings. This paper argues that Japan's economic experience of the last two decades does not provide unambiguous evidence that demand stimulus policies are ineffective. The paper describes the ways in which economic theory has been changed by the lessons from Japan.

This paper adds to what was previously known about Phillips’ life between his departure from Australia in 1937 until he became an academic in 1950. The paper includes new information about Phillips’ MBE and the attack on the Empire Star, the conditions at the Bandoeng prisoner of war camp in Java, and his operation of secret radios during the three and a half years of his imprisonment. The paper also attempts to explain Phillips’ notorious Pass degree in Sociology.

This paper uses micro data from the Household, Income and Labour Dynamics in Australia Survey to estimate the marginal propensity to consume (MPC). Estimates are made by examining two types of policy changes – to income tax rates and lump-sum transfers – which help to identify the effect of shocks to income on consumption. Using a fixed effects model the point estimate of MPC out of the tax cuts is around 1.0 and out of the Baby Bonus is at least 0.1. The paper also explores differences in the MPC across households according to measures of liquidity constraints and unemployment risks.

This paper studies the effects of trade liberalisation on poverty and income inequality in South Africa. The main issue of interest is the effect of international trade on households (especially their income). The approach presented in this paper relies on combining a macro-orientated computable general equilibrium model with a microsimulation model. The main concern regarding poor households is whether the decrease in nominal earnings for formal low-skilled and skilled workers is offset by the upward trend in formal employment levels. The analysis indicates that such a trade-off occurs, implying a decrease in poverty due to trade liberalisation.

Who records the largest drops in life satisfaction when they move into unemployment? Do men experience a larger drop in life satisfaction than women? Do Australians and Americans record a larger drop than Europeans? Using an Australian panel data-set (the Household Income and Labour Dynamics Survey of Australia), this paper finds that the unemployed in Australia report lower life satisfaction than observationally equivalent employed people (holding current income constant). Being currently unemployed is estimated to be equivalent to the loss of $42,100 annual income for men and $86,300 annual income for women. Thus, the drop in life satisfaction, after controlling for unobserved time invariant characteristics, associated with unemployment is larger for women than men. The impact of unemployment on life satisfaction is large compared to the drops in life satisfaction associated with changes in income and disability status. It is found that unemployment is less painful for men in Australia than for men in Germany and the United Kingdom. The paper hypothesises that the large fall in life satisfaction may be the result of a drop in life-time earnings, as well as a ‘psychological’ effect.

This paper argues that detailed studies of particular economies, such as Bob Gregory%u2019s work on Australia, are relevant to all of economics. The paper builds on the concept of a model species from biology to develop the notion of a model economy %u2013 one whose experiences illuminate fundamental economic issues; examines the criterion for an economy to serve as a model economy; and describes three areas %u2013 labour relations and the awards system of wage-setting, marketizing public services and growth through immigration and natural resources %u2013 where Australian experience provides insights into economic behaviour and the operation of markets broadly.

Data from the Longitudinal Surveys of Australian Youth are used to investigate factors that influence young Australians’ self-reported levels of ‘happiness’ during the school-to-work transition, focusing on the role of labour market experience. Panel logit models are fitted to control for individual effects. Fixed individual personality traits and marital status strongly influence reported happiness. There is evidence of declining wellbeing with duration of unemployment and of the importance of job quality, rather than just having a job. The validity of Clark and Oswald’s (1994) assertion that empirical findings from happiness research show that unemployment is involuntary is questioned. I Introduction Following work by Easterlin (1974), there has been a burgeoning number of papers within the economics literature analysing the factors that affect ‘subjective well-being’, and particularly the relationship between income or economic growth and well-being. The present paper investigates the factors that influence young Australians’ levels of happiness with their lives, with an emphasis upon the role of their early labour market experiences. Data are used from the 1995 Year 9 cohort of the Longitudinal Surveys of Australian Youth (LSAY) in which respondents were asked to rate their happiness on a four-point scale in the surveys from 1997 to 2002. These years correspond to the cohort’s final 2 years of high school and their entry into post-secondary education or training and the labour force. The main focus is upon the effect of time in unemployment and various aspects of a person’s working life on their overall happiness. Clark and

This paper investigates the ease with which recent immigrants to Australia from different countries and with different visa categories enter employment at an appropriate level to their prior education and experience in the source country. Unlike most of the earlier research in this field that studied the labour market status of migrants (wages, probabilities of employment, or unemployment, or participation) (see Miller, 1986; Beggs and Chapman 1988, 1990; Wooden, 1994; Borjas, 1999; McDonald and Worswick, 1999; Cobb-Clark, 2000, 2003; Richardson et al., 2001), this paper focuses on the quality of job that the migrant obtains on arrival in Australia. We provide alternative definitions of what is a good job1 in terms of objective and subjective criteria. The paper uses two sets of the longitudinal survey of immigrants to Australia (LSIA) data: the first cohort that arrived in 1993–1995 and the second cohort that arrived in 1999–2000. In particular, we study how changes in the social security legislation in 1997 (2-year waiting period for eligibility for benefits) affected the quality of job held by new migrants. While comparing the behaviour of migrants in the labour market with and without access to social security benefits, we study whether migrants are more likely to accept bad jobs after the legislative changes. The paper uses bivariate probit models to estimate the probabilities of accepting a good job in terms of the usual human capital and demographic variables (including the visa category for entry into Australia).

This paper reviews the measurement of equilibrium unemployment in Australia using the Phillips curve. To provide a theoretical framework through which these measurement exercises can be understood, the theory of equilibrium unemployment based on wage bargaining is also described and reviewed. The paper shows how studies have moved from specifying a unique and constant equilibrium rate of unemployment to specifications which emphasise the influence of unemployment benefits, hysteresis and a range of equilibrium rates of unemployment.

This paper derives and estimates an econometric model of labour supply among sole parents in Australia, using modelling techniques which treat the labour supply decision as a utility maximising choice between a given number of discrete states. In estimation, we control for random preference heterogeneity as well as Þxed and search costs. Using our econometric model, we look at the e.ects of actual and hypothetical welfare policy reforms on the employment choices of sole parents in Australia. The microsimulation results presented in this paper use the Melbourne Institute Tax and Transfer Simulator (MITTS), developed at Melbourne Institute of Applied Economic and Social Research.

This paper proposes a new method of explaining the temporal change in economic inequality in terms of changes in the sources of income. The method is based on the decomposition of the Gini coefficient by source of income. Using this method, the paper also examines changes of the sources of private income in Australia over the last two decades and their impact on the distribution of income. It will be seen that not only have the shares of income from different sources changed, but that there has been significant change in inequality of distribution of the components themselves.

This paper analyzes the earnings of immigrant men in Australia using data from Income Distribution Surveys for 1982, 1986 and 1990. The paper expands on the standard approach used in the literature to evaluate immigrant earnings adjustment by considering the impact of current labour market conditions and conditions at labour market entry on current earnings. Immigrants from non-English speaking backgrounds have significantly lower earnings on arrival in Australia compared with native-born males, and this gap is not narrowed as years in Australia increase. However, poorer macroeconomic conditions at entry are found to have a significantly smaller negative effect on the earnings of immigrants from non-English speaking backgrounds than native-born males.

The Phillips curve has generally been estimated in a linear framework. This paper investigates the possibility that the Phillips curve is indeed a curve, and shows that a convex short-run Phillips curve may be a more accurate representation of reality than the traditionally used linear specification. The paper also discusses the policy implications of convexity in the Phillips curve. These include the need for policy to be forward-looking and to act pre-emptively. Convexity provides a strong rationale for stabilisation policy, and it reinforces the need for policy-makers to proceed cautiously. It also implies that deep recessions may have only a marginally greater disinflationary impact than shallower ones, unless they induce large credibility bonuses.

The paper investigates trade strategy classification within a general equilibrium framework which includes both tradeables and non-tradeables. In a three-sector model there is apparently a wider range of trade strategies available than in the traditional two-sector model. Besides pure import-substitution (IS) and export promotion (EP) policies, mixed IS/EP policies might seek (ex ante) to create a protradeables bias rather than approximate neutrality. However, the ex-post outcome depends upon the substitution, complementarity and/or income effects of commercial policies on equilibrium relative prices. The paper demonstrates that the actual change in the incentive structure may differ from the intended strategy.

This paper analyzes the effect of an increase in government spending on the welfare of different generations in a dynamic general equilibrium model. The paper shows that the intergenerational incidence of government spending on a public good is determined not only by the welfare effects due to the public good and to financing the good but also by a welfare effect due to intertemporal substitution between private consumption when government spending is increased. The degree of substitutability between private consumption and public spending is shown to be a key determinant of this incidence.

Using data from the Household, Income and Labour Dynamics in Australia (HILDA) survey together with OLS and quantile regressions, this paper examines the changing returns to education and the evolving wage structure of young adults (aged 25–34 years) between 2001 and 2019. Estimates show that real wage growth was strong for both males and females over the 2000s, underpinned by wage structure effects. Between 2010/11 and 2018/19 wage growth was flat (zero) for males and subdued for females. Institutional factors are thought to underpin the growth in wages of low‐paid females over recent years, while education investments underpin recent wage growth amongst high‐paid females. Since 2001/2 the wage premium on a degree qualification has declined for males and females. There has been no change in the adjusted gender wage gap across successive cohorts of 25–34 year olds.

This paper quantifies the factors contributing to Australia’s gender gap in superannuation balances. Around 60 per cent of the gap can be attributed to the prior stock of superannuation, for respondents who had superannuation balances in both 2014 and 2018 in the Household Income and Labour Dynamics in Australia Survey. This is partly due to the accumulation of the prior gap with investment returns. Financial literacy and risk aversion explain around 7 per cent of the gap in total, such as through impacts on subsequent investment returns. Work patterns and wage rates affect contributions and explain approximately 30 per cent of the superannuation gap in total.

This paper examines the experience of nine industrial countries with monetary targeting. The paper suggests that monetary targets were adopted as a tactical response to a particular economic situation, not as monetary rules. Other objectives were given precedence over targets when thought desirable. Most countries changed the targeted aggregate, and two dropped targets altogether. While inflation fell in most countries, the extent to which this was due to the pursuit of monetary targets is unclear. The place of monetary aggregates in many countries now appears to be as one among a number of indicators considered by the authorities in the setting of monetary policy.

Do ethnic enclaves assist or hinder immigrants’ economic performance? The empirical literature on this question is inconclusive. In this paper we extend the literature by constructing a dynamic variable from micro‐panel data to capture the effects of spatial networks of immigrants’ ethnic‐specific resources. We account for endogeneity of the network and other variables. Using the HILDA data set, and a suite of robustness checks, results show that immigrants’ earnings are positively associated with the concentration and resources of their country‐of‐birth group. The effect is prominent for immigrants born in non‐English‐speaking countries and for high‐skilled immigrants, highlighting positive ethnic network spill‐over effects for these groups. Moreover, accounting for the network variable provides a viable explanation for the divisions in previous international results on ethnic concentration.

This paper examines the efficacy of the Australian points system in a family context among working‐age permanent resident immigrants who arrived between 2000 and 2011 when there was a major focus on skills selection. Sixty‐seven per cent of these immigrants were granted a skilled visa while 25 per cent hold a spousal visa (spouses of Australian citizens). More than half of the skilled visa recipients are the spouses of the primary applicants. Primary applicants among skilled visa holders are assessed for their skills in line with the Australian points system but secondary applicants, such as spouses, among skilled visa holders and spousal visa holders are not subject to any skills assessment before becoming permanent residents. We study differences in economic outcomes by permanent visa types and the role of points system factors in explaining these differences using the Personal Income Tax and Migrants Integrated Dataset and the Australian Census Longitudinal Dataset. We find that primary skilled visa holders earn at least 26–28 per cent more than spousal visa holders, and this is similar for both genders. However, spouses of primary skilled visa holders earn 13–18 per cent more than spousal visa holders. This difference is higher among females than males. Occupation differences can account for nearly half of the differences in income and can entirely capture the role of education and English proficiency. Primary skilled immigrants and their spouses have higher rates of labour force participation and employment than spousal visa holders, starting in the first year of arrival, and the gap is much higher for primary skilled visa holders, but these differences do not disappear quickly. [ABSTRACT FROM AUTHOR]

This paper describes an approach to making fiscal policy decisions based on probabilistic statements on the likely occurrence of events as specified in a rules‐based framework for making fiscal adjustments. The event probability forecasts are obtained from a simple time series econometric model of the key variables influencing debt dynamics (interest rates, output and debt itself). The approach is applied to data for ten developed countries for 1956–2016 and the analysis demonstrates the importance of accommodating international linkages in forecasting, noting that failure to do so would have led to excessive fiscal cutbacks and austerity in recent years.

This paper describes a fiscal database for Australia including measures of government spending, revenue, deficits, debt and various sub-aggregates as initially published and subsequently revised. The data vintages are collated from various sources and provide a comprehensive description of the Australian fiscal environment as experienced in real time. Methods are described which exploit the richness of the real-time data sets, and they are illustrated through an analysis of the extent to which stated fiscal plans are realised in practice and through the estimation of fiscal multipliers which draw a distinction between policy responses and policy initiatives. We find predictable differences between plans and actual fiscal policy and a larger multiplier for policy initiatives than for implementation errors.

It is possible to represent decision makers' beliefs on the algebra R×R, rather than R alone. Doing so allows us to represent decision makers' perceptions of risk on one part of the algebra, and their perceptions of uncertainty on the other. This paper shows that such beliefs can be updated in a 'Bayesian' manner and that the resulting representation of beliefs is reasonable relative to some other approaches. The model of belief formation and decision making is then used to explain some instances of anomalous economic behaviour. [ABSTRACT FROM AUTHOR] email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper compares the macroeconomic effects of global oil and iron ore price shocks on the Australian economy. Using a Bayesian structural vector autoregression model with sign restrictions, we identify three types of shock: supply, demand and specific demand. The main results suggest that, over the period from 1990Q1 to 2014Q4, the oil shock had a relative larger impact than the iron ore shock on output and inflation, while the iron ore shock was the dominant source of interest and exchange rate movements. The effects crucially depend on the underlying sources of oil or iron ore price shifts. As Australia is a small open economy, oil and iron ore prices should be treated as exogenous factors. Real GDP responds negatively to a rise in oil prices driven by supply disruptions, but positively to a similar shock on the iron ore market. Higher global demand for these commodities has a positive impact on the economy, but the iron ore demand shock is about twice larger. However, a positive oil and iron ore price shock driven by specific demand lead to a temporary decline in real GDP.

Inflation leads individuals to work harder to spend and not carry their money holdings. Two alternative margins have been used to model this effect: the extensive margin (the frequency of shopping per period) and the intensive margin (the average shopping time per trip). This paper investigates how inflation affects these two margins. It deviates from the previous literature by allowing individuals to vary both margins simultaneously. The analysis reveals that the impact of inflation on these two margins is determined by the interaction between the opportunity cost of carrying money and direct search costs. [ABSTRACT FROM AUTHOR]

In this paper we use the 1 July 2004 introduction of the Australian Baby Bonus to identify the effect of family income on child test scores at grade three. We use a difference-in-differences design. We find no evidence the Baby Bonus improved child outcomes in aggregate, but some evidence of a modest effect for children from disadvantaged backgrounds. We examine whether birth shifting associated with the Baby Bonus and two other Australian maternity payments has negative long-term effects on children. Despite concerns about this unintended treatment, we find no clear evidence of health or educational consequences.

This paper explores the implications of the quality of intermediate goods in an endogenous growth model. We show that a trade-off exists between the quality and the variety of products, which creates a wedge between the market-equilibrium quality and the socially optimal quality. Relative to the social optimum, the equilibrium quality could be either under-supplied or over-supplied, depending on the productivity-enhancing effect as well as the increasing returns to production specialisation and business-stealing effects. [ABSTRACT FROM AUTHOR]

This paper explores the relationship between local unemployment rates and the length of time people who have lost their job spend unemployed, using a competing risks model. High local unemployment is found to reduce the probability of re-employment for someone who was employed prior to a period of unemployment. However, individual factors such as age, education and experience are more important predictors of re-employment. This suggests there could be benefits from a policy response that focuses more on the individuals, and building skills that are resilient to structural change, than on job creation in local areas. [ABSTRACT FROM AUTHOR]

Prices play a central role in a wide range of applications in economics, ranging from macro topics such as inflation targeting, purchasing power parity between currencies, global poverty and real Gross Domestic Product (GDP) comparisons to micro topics such as inequality and poverty at household level and the distributive effects of price movements. The literature on price measurement has also impacted on, and been impacted by, developments in the demographic demand literature based on the treatment of household composition as analogous to prices. While there is now a sizeable statistical literature on price measurement, there is hardly any survey of the empirical economics literature where prices play a central role in the analysis. This paper attempts to address this gap and provides a survey of the methodological developments in price measurement followed by a selected review of their empirical applications. [ABSTRACT FROM AUTHOR]

This paper investigates whether the persistence and the time-varying nature of trend inflation can explain the persistence of inflation in Australia - that is, whether it can explain the apparent need for backward-looking inflation term(s) in the new Keynesian Phillips curve (NKPC) estimated using Australian data. We derive and estimate an extended open-economy NKPC equation, accounting explicitly for time-varying trend inflation. Our preferred, best-fitting estimates based on the closed-form specification with two indexation lags indicate a significant degree of indexation to past inflation. Thus, in contrast to the result for the US economy, our estimates suggest that accounting for time variation in trend inflation in the NKPC cannot explain away the inertia in the Australian inflation data. The estimates suggest that lagged inflation and future expectations of inflation enter the NKPC with almost equal weights. Finally, notwithstanding the previous results, we find a marked decline in the role of the backward-looking inflation terms since the adoption of an inflation-targeting regime by the Reserve Bank in 1993. [ABSTRACT FROM AUTHOR]

In this paper we document the rise in wage inequality in Australia over the last decade. A key driver of this inequality is unobservable or residual inequality. We decompose residual wage inequality into permanent and transitory components. The estimates of the permanent shock from the first-difference approach allow us to reconcile life-cycle wage inequality.

This paper provides empirical estimates of the determinants of crime rates in Australia. It differs from most modern criminological analysis by being aggregative rather than offender-based and by deriving from the economic approach to criminal behaviour. Its major finding is that court committals and imprisonments have operated as major deterrent factors in explaining variations in recorded crime rates. These deterrence results seem especially strong and robust. Improved measurement, however, could alter the findings for some other influences examined. The paper considers the relationship of these research findings to criminal justice policy.

The very high levels of teenage unemployment experienced in Australia since 1974 have largely been thought to be he to the diyerential impact of employment demand on the youth labour market. In this paper we show that during the recession teenage employment has been favoured relative to the employment trend of the past and that the large increases in teenage unemployment have largely arisen from the marked change in the labour force participation rate. The paper goes on to examine factors which seem to have been important in generating the changed supply response —changes in school participation rates, the increased importance of part-time work, increases in unemployment benefits, the permissible income levels for unemployment benefit recipients, changes in wage levels and the important interactions between these various factors.

This paper develops a short-run employment function model in which the speed of adjustment is positively related to the level of unemployment. The model is fitted to aggregate Australian data for the period 1911–12 to 1938–39, a period which includes the high unemployment years of the 1930s. Full information maximum-likelihood estimation procedures are used and a log-likelihood ratio test indicates that the variable speed of adjustment model is to be preferred to a fixed adjustment speed model. The speed of adjustment was quite sensitive to the unemployment rate. The policy conclusion of the paper is that if Australian unemployment rates rise to levels that are unprecedented in the post-war period, firms may shake out surplus labour at a surprisingly fast rate.

This paper examines the influences of a number of demographic characteristics and the duration of unemployment on the probability of leaving unemployment. This probability is found to decrease as the duration of unemployment increases, with married females having the highest probability of exit. Various measures of average completed duration suggest that the longest spells of unemployment are incurred by older males. These appear to be longest for males withdrawing from the labour market. The relationship between the duration of unemployment and the probability of exit is important for labour market policy. Some relevant considerations are also explored in the paper.

This paper uses unit record data from the 1985 Australian Longitudinal Survey to review the major features of the youth labour market. It is shown that education plays an important role in determining the incidence of unemployment, wages, hours of work and access to training opportunities. Analyses of labour market dynamics indicates that the probability of leaving unemployment falls off substantially as the duration of the unemployment spell increases. A major conclusion of the paper is that the longer term unemployed appear to be segmented from other labour market participants. An implication of this finding is that there b very little which the longer term unemployed can do at the margin to influence their success other than adopt the most productive method of job search.

This paper contains an analysis of the sources of income inequality in Australia, based on data from the ABS income survey for 1978-79. The analysis proceeds by progressive decomposition of the population into component groups differentiated by characteristics such as sex, age, employment status and occupation. At each stage of the decomposition, total inequality is partitioned into contributions from within and between the component groups, as measured by the Shorrocks Iq index. The importance of the characteristic in question as a source of inequality can then be assessed. While the results of the analysis are described in some detail, the emphasis of the paper is primarily methodological.

This paper examines the growth in welfare spending in Australia over the 20 years from the early 1960s to the early 1980s. Particularly for pensioners and beneficiaries with children, the levels of benefit and high tax rates implicit in the tax and social security systems are shown to create disincentives over wide ranges of private income. A careful examination of the evidence indicates that more generous levels of benefits had a modest but significant part in the growth of unemployment since 1970. The paper concludes by suggesting that the efficiency costs of meeting society's distributional objectives can be minimized by targeting assistance to the most needy and by the careful use of income testing.

The aim of this paper is to test the expectations theory of the term structure of interest rates in the Australian market for short-term financial assets. The paper finds that the joint hypothesis of the expectations theory and zero (or a constant risk premium) cannot be rejected in the period since the introduction of the tender system for sale of government securities in 1979. The floating of the Australian dollar in 1983 did not alter the findings.

This paper attempts to analyze an interaction between international trade and domestic environmental pollution. A country engaging in international trade biases its domestic economic structure toward exportable sectors. The bias thus caused has a significant impact on the quality of the environment. It will be shown that a country can and should control international trade activities as a means of dealing with pollution problems. One of the paper's main purposes is to give a warning to a country which expands its international trade activities without taking serious consideration of its domestic environment.

In a recent paper Roberts (1978) has extended Ramanathan's model (1975) to a two-sector, two-currency and two-country neoclassical growth model with flexible exchange rates. Under the assumption that the consumption good is relatively capital intensive, Roberts obtains two important propositions: an increase in domestic monetary expansion will increase the domestic overall capital intensity, decrease the foreign overall capital intensity, and worsen the terms of trade for the country importing the investment good; an increase in domestic monetary expansion may increase or decrease the level of trade. In this paper, we add to and generalize these results by using a simple yet thorough comparative statics analysis without the factor intensity condition.1It will be seen that the complexity and ambiguity of Roberts' results are substantially reduced.

This paper examines the effects of three simple rules for monetary policy in an econometric model of the Australian economy. Its main contribution is to examine such rules under a range of exogenous shocks to the economy. rather than over a particular historical episode. A second contribution is to show that, in the model used, the money supply may be controlled by variations in interest rates under official control. However. lags of two to four quarters are involved for the shocks considered in the paper. The results are consistent, in the short run, with those obtained by Poole—that is, it is sensible to fix the money supply when the shocks are ‘real’ and to fix the interest rate when the shocks are ‘financial’. In the medium to long run. however, it is shown that the variability of inflation and unemployment may be less when money is controlled even for a financial shock. These conclusions are strengthened if allowance is made for the ‘underwriting’ problem.

This paper considers the problem of constructing an index, in the presence of a large public sector, which will tell us whether any adjustment to wages or other payments to households in one situation will leave the households better or worse off than in some previous situation with a different set of prices. This index is an extension of the true price index. The paper also proposes an index of the affordable wages with which the first index should be compared.

This paper examines the dynamic behaviour of the Okun coefficient using quarterly data (1980Q3-2014Q1). It is found that a rise in labour productivity and a fall in output can increase unemployment. A 1 per cent reduction in the unemployment rate requires only a 2.4 per cent increase in real output growth above the average growth rate, but during recessions this figure increases to 4.53 per cent. The probability of observing a higher coefficient was limited to recessionary periods. Given that recessions are now less frequent, Okun's law continues to be a useful rule of thumb in Australia.

Using a two-country framework, this paper examines the welfare effect of partially replacing a tariff with a production subsidy. It considers some plausible situations for industry protection, including where the initial tariff is higher than the optimal tariff, where a certain output of the protected commodity must be maintained, and where domestic production of the sector yields some externalities. In these cases it is shown that the partial replacement benefits the country. Properties of the optimal replacement are also explored.