Steepness and deepness in the Australian macroeconomy

This study uses nonparametric tests - the triples test and the BDS test, to examine whether key Australian macroeconomic aggregates exhibit nonlinearities and important 'steepness' and 'deepness' asymmetries at the business cycle frequency. Evidence is found of nonlinearities but there is little evidence of deepness in the Australian macroeconomy. However, there is evidence of steepness, especially concerning labour market variables, as well as both the CPI and M3. The evidence suggests that unemployment (employment) rises (falls) rapidly in recessions and only recovers slowly over time. Also, positive asymmetries in M3 are reflected in similar asymmetries in the CPI but not in output, consumption or investment.

Reconciling Globalisation and Technological Change: Growing Income Inequalities and Remedial Policies

From the mid-1970s through the 1980s and into the 1990s, wage inequality and skill differentials in earnings and employment increased sharply in OECD countries. After 1973 and especially in the 1980s, the US experienced a dismal real wage performance for the less skilled. Among the factors singled out by economists as possible major contributors to this development are economic globalisation processes and skill-biased technological change. Although these are most commonly considered as independent influences, after critically outlining views about these factors, this article argues that strong interdependence exists between them. The article then examines potential policy responses to this growing inequality.

Saving, productivity and national income: a discrete-time geometric framework

This paper proposes an alternative geometric framework for analysing the inter-relationship between domestic saving, productivity and income determination in discrete time. The framework provides a means of understanding how low saving economies like the United States sustained high growth rates in the 1990s whereas high saving Japan did not. It also illustrates how the causality between saving and economic activity runs both ways and that discrete changes in national output and income depend on both current and previous accumulation behaviour. The open economy analogue reveals how international capital movements can create external account imbalances that enhance income growth for both borrower and lender economies. (C) 2002 Elsevier Science B.V. All rights reserved.

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.

Health investment, saving, and public policy

This paper develops an overlapping-generations model in which agents invest in health to prolong life in both working and retirement periods. It explores how unfunded social security with or without health subsidies affects life expectancy, economic growth, and welfare. In particular, by extending life at a possible cost of capital accumulation, health subsidies and a pay-as-you-go pension can improve welfare, especially in the short run.