On the robustness of short-term interest rate models

This paper investigates the robustness of a range of short–term interest rate models. We examine the robustness of these models over different data sets, time periods, sampling frequencies, and estimation techniques. We examine a range of popular one–factor models that allow the conditional mean (drift) and conditional variance (diffusion) to be functions of the current short rate. We find that parameter estimates are highly sensitive to all of these factors in the eight countries that we examine. Since parameter estimates are not robust, these models should be used with caution in practice.

Inflation expectations, interest rates and arbitrary income transfers

Unexpected inflation, disinflation or deflation cause arbitrary income transfers between an economy's borrowers and lenders. This redistribution results from distorted real interest rates that are too high when price level changes are over-predicted and too low when they are under-predicted. This article shows that in Australia's case, inflation expectations were mostly biased upwards throughout the 1990s, according to the Melbourne Institute of Applied Economic and Social Research series and to a new derived series based on bond yields, implying that real interest rates were too high over this time. In turn, this caused substantial arbitrary income transfers from debtors to creditors, estimated to have averaged up to 3 per cent of gross domestic product over the period.

Are there non-linearities in short-term interest rates?

The present paper investigates the characteristics of short-term interest rates in several countries. We examine the importance of nonlinearities in the mean reversion and volatility of short-term interest rates. We examine various models that allow the conditional mean (drift) and conditional variance (diffusion) to be functions of the current short rate.We find that different markets require different models. In particular, we find evidence of nonlinear mean reversion in some of the countries that we examine, linear mean reversion in others and no mean reversion in some countries. For all countries we examine, there is strong evidence of the need for the volatility of interest rate changes to be highly sensitive to the level of the short-term interest rate. Out-of-sample forecasting performance of one-factor short rate models is poor, stemming from the inability of the models to accommodate jumps and discontinuities in the time series data.

What are the economic prospects of developing aquaculture in Queensland to supply the low price white fillet market? Lessons from the US channel catfish industry

The farming of channel catfish (Ictalurus punctatus) is the largest (by volume and value) and most successful (in terms of market impact) aquaculture industry in the United States of America. Farmed channel catfish is the most consumed (in terms of volume per capita) fish fillet in the U.S. market. Within Australia, it has long been suggested by researchers and industry that silver perch (Bidyanus bidyanus) and possibly other endemic teraponid species possess similar biological attributes for aquaculture as channel catfish and may have the potential to generate a similar industry. The current teraponid industry in Australia, however, shows very little resemblance to the catfish industry, either in production style or market philosophy. A well established budget framework from the literature on U.S. channel catfish farming has been adapted for cost and climate conditions of the Burdekin region, Queensland, Australia. Breakeven prices for the hypothetical teraponid farms were found to be up to 50% higher than those published for catfish farms however were much lower than those reported for silver perch production in Australia using current, endemic styles of production. The breakeven prices for the hypothetical teraponid farms were most sensitive (in order of significance) to feed prices, production rates, interest rates, fingerling prices and electricity prices. At equivalent feed costs the costs of production between the hypothetical catfish farms in the Mississippi, U.S. and the hypothetical teraponid farms in the Burdekin, Australia were remarkably similar. The cost of feeds suitable for teraponid production in Australia are currently around double that of catfish feeds in the U.S. Issues currently hindering the development of a large scale teraponid industry in Australia are discussed.

The current account, fiscal policy, and medium-run income determination

This article presents a new framework for analyzing the simultaneous determination of current account imbalances and the path of national income. Using standard macroeconomic behavioral relationships, it first examines how and why current account deficits matter by investigating links between domestic consumption, government spending, output, saving, investment, interest rates, and capital flows. Central to the model is the distinction between aggregate output and expenditure that enables dissection of the effects of discretionary fiscal change on the current account and national income. The framework yields results relevant to the twin deficits hypothesis that are contrary to those of standard models.

Non-Equilibrium Reaction Rates in the Macroscopic Chemistry Method for DSMC Calculations

The Direct Simulation Monte Carlo (DSMC) method is used to simulate the flow of rarefied gases. In the Macroscopic Chemistry Method (MCM) for DSMC, chemical reaction rates calculated from local macroscopic flow properties are enforced in each cell. Unlike the standard total collision energy (TCE) chemistry model for DSMC, the new method is not restricted to an Arrhenius form of the reaction rate coefficient, nor is it restricted to a collision cross-section which yields a simple power-law viscosity. For reaction rates of interest in aerospace applications, chemically reacting collisions are generally infrequent events and, as such, local equilibrium conditions are established before a significant number of chemical reactions occur. Hence, the reaction rates which have been used in MCM have been calculated from the reaction rate data which are expected to be correct only for conditions of thermal equilibrium. Here we consider artificially high reaction rates so that the fraction of reacting collisions is not small and propose a simple method of estimating the rates of chemical reactions which can be used in the Macroscopic Chemistry Method in both equilibrium and non-equilibrium conditions. Two tests are presented: (1) The dissociation rates under conditions of thermal non-equilibrium are determined from a zero-dimensional Monte-Carlo sampling procedure which simulates ‘intra-modal’ non-equilibrium; that is, equilibrium distributions in each of the translational, rotational and vibrational modes but with different temperatures for each mode; (2) The 2-D hypersonic flow of molecular oxygen over a vertical plate at Mach 30 is calculated. In both cases the new method produces results in close agreement with those given by the standard TCE model in the same highly nonequilibrium conditions. We conclude that the general method of estimating the non-equilibrium reaction rate is a simple means by which information contained within non-equilibrium distribution functions predicted by the DSMC method can be included in the Macroscopic Chemistry Method.

Improving precision and reducing bias in biological surveys: estimating false-negative error rates

The use of presence/absence data in wildlife management and biological surveys is widespread. There is a growing interest in quantifying the sources of error associated with these data. We show that false-negative errors (failure to record a species when in fact it is present) can have a significant impact on statistical estimation of habitat models using simulated data. Then we introduce an extension of logistic modeling, the zero-inflated binomial (ZIB) model that permits the estimation of the rate of false-negative errors and the correction of estimates of the probability of occurrence for false-negative errors by using repeated. visits to the same site. Our simulations show that even relatively low rates of false negatives bias statistical estimates of habitat effects. The method with three repeated visits eliminates the bias, but estimates are relatively imprecise. Six repeated visits improve precision of estimates to levels comparable to that achieved with conventional statistics in the absence of false-negative errors In general, when error rates are less than or equal to50% greater efficiency is gained by adding more sites, whereas when error rates are >50% it is better to increase the number of repeated visits. We highlight the flexibility of the method with three case studies, clearly demonstrating the effect of false-negative errors for a range of commonly used survey methods.

Undergraduate teaching of ideal and real fluid flows: The value of real-world experimental projects

This study describes the pedagogical impact of real-world experimental projects undertaken as part of an advanced undergraduate Fluid Mechanics subject at an Australian university. The projects have been organised to complement traditional lectures and introduce students to the challenges of professional design, physical modelling, data collection and analysis. The physical model studies combine experimental, analytical and numerical work in order to develop students’ abilities to tackle real-world problems. A first study illustrates the differences between ideal and real fluid flow force predictions based upon model tests of buildings in a large size wind tunnel used for research and professional testing. A second study introduces the complexity arising from unsteady non-uniform wave loading on a sheltered pile. The teaching initiative is supported by feedback from undergraduate students. The pedagogy of the course and projects is discussed with reference to experiential, project-based and collaborative learning. The practical work complements traditional lectures and tutorials, and provides opportunities which cannot be learnt in the classroom, real or virtual. Student feedback demonstrates a strong interest for the project phases of the course. This was associated with greater motivation for the course, leading in turn to lower failure rates. In terms of learning outcomes, the primary aim is to enable students to deliver a professional report as the final product, where physical model data are compared to ideal-fluid flow calculations and real-fluid flow analyses. Thus the students are exposed to a professional design approach involving a high level of expertise in fluid mechanics, with sufficient academic guidance to achieve carefully defined learning goals, while retaining sufficient flexibility for students to construct there own learning goals. The overall pedagogy is a blend of problem-based and project-based learning, which reflects academic research and professional practice. The assessment is a mix of peer-assessed oral presentations and written reports that aims to maximise student reflection and development. Student feedback indicated a strong motivation for courses that include a well-designed project component.

Women's health Australia: Recruitment for a national longitudinal cohort study

The Women's Health Australia (WHA) project is a longitudinal study of several cohorts of Australian women, which aims to examine the relationships between biological, psychological, social and lifestyle factors and women's physical health, emotional well-being, and their use of and satisfaction with health care. Using the Medicare database as a sampling frame (with oversampling of women from rural and remote areas), 106,000 women in the three age groups 18-23, 45-50 and 70-75 were sent an invitation to participate and a 24-page self-complete questionnaire. Reminder letters, a nation-wide publicity campaign, information brochures, a freecall number for inquiries, and the option of completing the questionnaire by telephone in English or in the respondent's own language, were used to encourage participation. Statutory regulations precluded telephone follow-up of non-respondents. Response rates were 41% (N = 14,792), 54% (N = 14,200) and 36% (N = 12,614) for the three age groups. Comparison with Australian census data indicated that the samples are reasonably representative of Australian women in these age groups, except fur a somewhat higher representation of women who are married or in a defacto relationship, and of women with post-school education. The most common reason for non-participation was lack of interest or time. Personal circumstances, objections to the questionnaire or specific items in it, and concerns about confidentiality were the other main reasons. Recruitment of three representative age-group cohorts of women, and the maintenance of these cohorts over a number of years, will provide a valuable opportunity to examine associations over time between aspects of women's lives and their physical and emotional health and well-being.

Hysterectomy fractions in New South Wales, 1971-2006

Hysterectomy fractions by age group for particular periods are of interest for: estimating proper population denominators for calculation of disease and procedure rates affecting the cervix and uterus; estimating the target population for Pap test programs, and response rates; and as a way of displaying the cumulative consequences of hysterectomies in a population. Hysterectomy fractions for populations can be determined by direct inquiry via a representative sample survey, or, as in this study, from prior hysterectomy rates of the cohorts of women which compose each age bracket. Hysterectomy data 1979-93 were obtained from the hospital In-patients Statistics Collection (ISC) which covers both public and private hospitals in NSW. Annual population denominators of women were obtained from Census data. Data were modelled by Poisson regression, using five.-year age group (15-greater than or equal to 85 years), annual period, and five-year birth cohort (APC model). Forward- and back-projection of the period effects were undertaken. The resultant NSW hysterectomy fractions by age and period are consistent with fractions obtained from modelled hysterectomy rates for Western Australia (1980-84), and fractions from national representative sample surveys (1989/90 and 1995) for younger women, but not for women aged greater than or equal to 70 years in 1995, which revealed higher hysterectomy fractions than modelled hysterectomy data would suggest. Hysterectomy fractions for NSW women by five-year age group for quinquennia centred on 1971 to 2006 are provided.

On modifications to the long-term survival mixture model in the presence of competing risks

A mixture model for long-term survivors has been adopted in various fields such as biostatistics and criminology where some individuals may never experience the type of failure under study. It is directly applicable in situations where the only information available from follow-up on individuals who will never experience this type of failure is in the form of censored observations. In this paper, we consider a modification to the model so that it still applies in the case where during the follow-up period it becomes known that an individual will never experience failure from the cause of interest. Unless a model allows for this additional information, a consistent survival analysis will not be obtained. A partial maximum likelihood (ML) approach is proposed that preserves the simplicity of the long-term survival mixture model and provides consistent estimators of the quantities of interest. Some simulation experiments are performed to assess the efficiency of the partial ML approach relative to the full ML approach for survival in the presence of competing risks.