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We propose a heterogeneous agent model (HAM) of four groups of investors with Markov chain regime-dependent beliefs for the housing market. Within the Markov switching framework, we take into account how heterogeneous investors shift their trading behaviour in response to changes in housing market conditions. The model is estimated and compared with the benchmark rational expectation models using the Australian housing market data from 1982Q1 to 2013Q2. We find evidence of within- and between-group heterogeneity in the Australian housing market. We show that HAM with Markov switching beliefs provides a better in-sample estimation efficiency and outperforms the conventional rational expectation models in terms of out-of-sample prediction. [ABSTRACT FROM PUBLISHER]

This article investigates whether the (rational) expectations hypothesis holds for Australian yield data (it does not), whether the hypothesis holds after adjusting for term premia estimated from an affine term structure model (it appears to) and whether the yield process implied by the term structure model can match the failure of the hypothesis on unadjusted yields (it can). These results suggest that the term structure model used in Finlay and Chambers (2009) does a reasonable job in capturing the risk-neutral and real-world dynamics of Australian interest rates, at least as measured through the prism of the expectations hypothesis. [ABSTRACT FROM AUTHOR]

In the context of calls for a 'third way' which proposes the abandonment of many of the social democratic and statist commitments of the postwar era, this paper reviews both the responsibilities accepted by peak bodies such as ACOSS and those that ought to be retained by government. It is sceptical of claims that social policy debates in Australia lead to the conclusion that welfare state development here has been satisfactory. Social democratic objectives (derived from intellectual contributions in the 1940s and 1950s as well as from the comparative political economy of the 1980s and 1990s) emphasize more decommodified provision of services than can be readily admitted in Australia. If the demand for social welfare and social policy continues to increase to the extent suggested by past and present circumstances, serious implications emerge for both public and private providers. [ABSTRACT FROM AUTHOR]

Empirical studies of simultaneous rational expectations (RE) models of spot and futures markets for non-storable commodities, such as finished live cattle, are rare. Indeed, only two countries, the US and Australia, have produced data sets for the study of such markets. This paper develops, and presents estimates of a simultaneous RE model of the live cattle market in Australia, the world's leading beef exporting country. The model contains functional relationships for short hedgers and short speculators, long hedgers and long speculators, and consumers, and is completed with a spot price equation and market clearing identity. Augmented Dickey-Fuller and Phillips-Perron tests for unit roots are executed, and Johansen cointegration tests are employed to investigate whether the I(1) variables are cointegrated. Structural equations are estimated by maximum likelihood when ARCH effects are present, by instrumental variables in the absence of serial correlation, and by non-linear least squares when a correction for autocorrelation is required. The estimates of all structural parameters are significant at the five per cent level. Post-sample, the model forecasts spot and futures prices with per cent RMSE's of 4.4 per cent and 2.5 per cent, respectively. In forecasting the spot price, the model outperforms but not significantly, a random walk, an ARIMA model, and a lagged futures price as a predictor of the spot price. The outcome of this last comparison implies that the efficient markets hypothesis cannot be rejected. [ABSTRACT FROM AUTHOR]

Educational outcomes have descended on schools with a ferocity unimaginable a few years ago. We have reached the point where outcomes rhetoric is so deeply embedded in the official discourses of schooling that it appears to be `the only game in town'. This paper outlines the economic rationalist origins of outcomes orientations, and uses an Australian background to expose the pervasive myth about the relationship of outcomes to aspects of leaching and learning. [ABSTRACT FROM AUTHOR]

The purpose of this paper is to exploit the cointegration methodology which has been developed by Granger (1981), Granger and Weiss (1983), Engle and Granger (1987) and Johansen (1988) to investigate the relationship which exists between consumption expenditures and the level of income. This methodology has implications for both the ECM and the REPI models of consumption. Firstly, it establishes the conditions for the existence of valid ECM representations while pointing to the regression bias that results from such representations of non-cointegrated data. Secondly, it facilitates testing of the REPI model by generating stationary quasi-differenced variables which allow the full set of restrictions implied by the rational expectations hypothesis to be applied to the data. Empirical investigations of the ECM model using cointegration techniques have recently been reported by Drobney and Hall (1987) using UK data and by Engle and Granger (1987) using US, while the same technique has been employed by Campbell (1987) and MacDonald and Speight (1989) to test the REPI model on US and UK data respectively. This paper exploits the cointegration literature to investigate the ability of the REPI model to explain the consumption-income relationship in Australia. A novel feature of our analysis is that, in contrast to other researchers, we use a multivariate cointegration methodology. [ABSTRACT FROM AUTHOR]

This paper examines the role of fundamental economic variables in explaining movements in the Australian/US dollar exchange rate over the period January 1984 to December 1986. This is accomplished by first outlining in Section II various specifications of the monetary approach to exchange rate determination including the flexible price monetary approach (FLMA), the sticky price monetary approach (SPMA) and the real interest differential (RID) model. These models are tested in Section III using the recently developed cointegration methodology. Subsequent analysis in Section IV outlines the rational expectations monetary approach to exchange rate determination (REMAER) and tests the extent to which it is consistent with the data. These tests examine both the monetary model elasticity restrictions as well as the rational expectations restrictions. In addition, a number of implied variance bounds restrictions of the REMAER are investigated. Section V then proceeds to further examine the REMAER by investigating the extent to which speculative bubbles have been a feature of the Australian foreign exchange market during the recent period of floating rates. Finally, Section VI summarizes the paper and draws conclusions. Amongst the main findings are the existence of limited support for monetary models of the exchange rate determination process in Australia together with no evidence of overshooting or of speculative bubbles. [ABSTRACT FROM AUTHOR]

The new classical policy ineffectiveness proposition (PIP) that systematic demand management policies are ineffective has already been subjected to several empirical tests (see Attfield, Demery and Duck (1985); Carter and Maddock (1984) and Shaw (1987) for reviews). However, it is well-known that the validity of PIP is based on models in which not only economic agents form expectations rationally but also on the assumption that the price level is fully flexible and adjusts to clear the market within the unit time period. Buiter (1980) showed that if price adjustments are gradual, fully anticipated changes in policy do affect the real variables. Subsequently Home and McDonald (1984) have tested the Buiter model for Australia. In this paper it will be pointed out that the Buiter model is conceptually unsatisfactory and the parametric structure of its reduced form output equation is complicated. As a consequence it is not possible to identify the price inertia parameter, which is important, unless all the non-linear restrictions, implied by the structural coefficients, are imposed on the reduced form coefficients. Next we show that the reduced form output equation of the new classical model with gradual price adjustment can be derived from a conceptually more satisfactory framework. The main advantage of our approach is that the coefficient structure of our output equation is simpler and the price inertia coefficient can be easily identified by imposing only a simple partial restriction on the reduced form coefficients. The outline of this paper is as follows: Section II explains our formulation of the model. In Section III we illustrate its usefulness by estimating the output equation with data from Horne and McDonald (1984). Conclusions and limitations of our paper are given in Section IV. However our paper should be seen as illustrating a simple method of testing PIP rather than a definitive work on the significance of the new classical model for Australia. The... [ABSTRACT FROM AUTHOR]

The proposition that systematic aggregate-demand policy does not affect real variables (the policy-ineffectiveness proposition or PIP) is usually derived from a stochastic macro model having two properties — rational expectations (RE) and structural neutrality (SN) or a Lucas supply function. The proposition has been extensively tested using overseas data but, with the exception of the Home and McDonald (1984) paper, has received little empirical attention in Australia. The purpose of this paper is to subject the proposition as it applies to monetary policy to econometric tests using Australian data. [ABSTRACT FROM AUTHOR]

This paper investigates open market operations in Australia and incorporates some key features of these operations into a simple rational expectations macroeconomic model Where relevant, comparisons with US operating procedures are made. The major finding is that the Reserve Bank of Australia like the Federal Reserve uses the overnight interest rate as its policy instrument. However, specific features of the Australian money market imply that direct control of the interest rate will be a more efficient policy in Australia than in the United States. [ABSTRACT FROM AUTHOR]

Focuses on the contributions of economist Chris Higgins in the establishment of economic modelling in Australian Treasury. Development of computer-based infrastructure for updating data; Role of rational expectations in economic processes; Concerns on endemic inflation.

Using Australian data, this note tests the stochastic implications of Hall's (1978) rational-expectations life-cycle consumption model. The strong version of the hypothesis can only be rejected using lagged values of the change in the unemployment rate and a particular measure of disposable income. [ABSTRACT FROM AUTHOR]