Volume 41, Issue 3, 2011
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Articles:
I POLICY DEBATES AND CONTROVERSIES
- Debunking Macroeconomics (Steve Keen)
- Beyond the Australian Debt Dreamtime: Recognising Imbalances (Mark McGovern)
II RECENT TRENDS IN ECONOMIC RESEARCH
- Efficiency of Research Performance of Australian Universities: A Reappraisal using a Bootstrap Truncated Regression Approach (Boon Lee)
- Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia (A.F.M. Kamrul Hassan and Ruhul A. Salim)
- Estimating Production Response of Broadacre Farms in Western Australia: The Nexus of Empirics and Economics Revisited (Vilaphonh Xayavong, Nazrul Islam, and Ruhul Salim)
- Unintended Migration Consequences of US Welfare Reform (Hal W. Snarr, Daniel Friesner, and Mark L. Burkey)
- Price Effects of Monetary Policy: The Case of a Small Open Economy of New Zealand (Shahnawaz Karim, Minsoo Lee, and Christopher Gan)
- Economic Policies, Political Considerations and Overall Health (Stavros A. Drakopoulos)
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Debunking Macroeconomics
Steve Keen
Pages: 147-168
Abstract: The failure of neoclassical models to warn of the economic crisis has led to some rare soul searching in a discipline not known for such introspection. The dominant reaction within the profession has been to admit the failure, but to argue that there is no need for a drastic revision of economic theory. I reject this comfortable conclusion, and argue instead that this crisis illustrates the point made beforehand by Robert Solow, that models in which macroeconomic pathologies are impossible are not adequate models of capitalism. Hicks’s critique of his own IS-LM model also indicates that, though pathologies can be imposed on an IS-LM model, it is also inappropriate for macroeconomic analysis because of its false imposition of equilibrium conditions derived from Walras’ Law. I then focus upon what I see as the key weakness in the neoclassical approach to macroeconomics which applies to both DSGE and IS-LM models: the false assumption that the money supply is exogenous. After outlining the alternative endogenous money perspective, I show that Walras’ Law must be generalized for a credit economy to what I call the “Walras-Schumpeter-Minsky Law”. The empirical data strongly supports this perspective, emphasizing the need for a “root and branch” reform of macroeconomics.
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Beyond the Australian Debt Dreamtime: Recognising Imbalances
Mark McGovern
Pages: 169-194
Abstract: Sadly, all the efforts of a generation of Australian men and women have only made them more indebted to the rest of the world. Australia’s external net wealth is negative, soon passing minus $900b on an accelerating downward trajectory. This ongoing dissipation of national resources is unsustainable. Australians live in a debt dreamtime, one from which the rest of the world has been rudely awakened. After years of inadequate policies, the nation has a large external debt and significant government exposures. Servicing pressures are growing as rising uncertainties permeate global credit markets. Reserve Bank policies are worsening Australia’s external position and needlessly driving up internal costs. Major policy rethinking is warranted. Relevant issues are still little considered, crowded out of dialogues by comforting myths that accompany the Australian Debt Dreamtime. Imbalances need proper recognition with new approaches and strategies developed. Automatic corrections will not occur as history and current overseas experiences demonstrate. A real awakening, improved positioning and a touch of luck are required if Australians are to avoid being seriously impoverished by world events and their own confused Dreaming.
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Efficiency of Research Performance of Australian Universities: A Reappraisal using a Bootstrap Truncated Regression Approach
Boon Lee
Pages: 195-204
Abstract: The motivation of the study stems from the results reported in the Excellence in Research for Australia (ERA) 2010 report. The report showed that only 12 universities performed research at or above international standards, of which, the Group of Eight (G8) universities filled the top eight spots. While performance of universities was based on number of research outputs, total amount of research income and other quantitative indicators, the measure of efficiency or productivity was not considered. The objectives of paper are twofold. First, to provide a review of the research performance of 37 Australian universities using the data envelopment analysis (DEA) bootstrap approach of Simar and Wilson (J Econ, 136:31–64, 2007). Second, to determine sources of productivity drivers by regressing the efficiency scores against a set of environmental variables.
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Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia
A.F.M. Kamrul Hassan and Ruhul A. Salim
Pages: 205-216
Abstract: The aim of this paper is to examine whether the commodity prices predict inflation, unemployment and short term interest rate in Australia. Advanced time series econometric modeling such as vector autoregressive model, cointegration and granger causality are used for this purpose. The empirical results show that three commodity prices (COMRL, COMNRL and COMBSMTL) precede inflation. However, no evidence of reverse causation is found. These findings have important implication for monetary authority. Inflation targeting experience has so far been hit by positive supply shocks. In case of negative supply shock, commodity price may be useful in singling out the likely direction of inflation.
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Estimating Production Response of Broadacre Farms in Western Australia: The Nexus of Empirics and Economics Revisited
Vilaphonh Xayavong, Nazrul Islam, and Ruhul Salim
Pages: 217-232
Abstract: Reliable estimates of elasticities are fundamental requirement to accurate economic forecasting and valid analyses of the impacts of changes in government policies or international events. The aim of this paper is thus, to estimate production response for broadacre farms in Western Australia by using a normalized quadratic profit function for the period 1977/78 to 2005/06. The result reflects the imposition of curvature restrictions for a normalized profit function, and estimated elasticities are found to be less elastic in the short run. The results from this exercise can be used in a number of ways, depending on the policy objective in mind, such as simulation for forecasting agricultural production.
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Unintended Migration Consequences of US Welfare Reform
Hal W. Snarr, Daniel Friesner, and Mark L. Burkey
Pages: 233-252
Abstract: Researchers have analyzed whether US welfare reform has induced interstate migration. Empirical results are inconclusive because methodologies are based on pre-reform thinking. This paper presents a post-reform migration model. We find that recipients move to avoid harsh sanction policies, seek lenient work requirements, and extend time limits. Unlike the first two behavioral responses, the latter is controversial. Critics will argue that such moves are illegal, and violators can be prosecuted because states share data. However, only active cases are being shared, meaning violators cannot be caught. Our model produces testable hypotheses which are consistent with (and reconcile) previous empirical results.
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Price Effects of Monetary Policy: The Case of a Small Open Economy of New Zealand
Shahnawaz Karim, Minsoo Lee, and Christopher Gan
Pages: 253-272
Abstract: This paper empirically examines the price effects of monetary policy shocks in New Zealand. Empirical analysis incorporates variables suggested by a hybrid New Open Economy Macroeconomic (NOEM) model, allowing both ‘producer and local currency pricing to market (PCP and LCP-PTM)’ activities of foreign exporters. Empirical findings indicate the absence of any price puzzle and show that New Zealand producer price index (PPI) responds more sluggishly than consumer price index (CPI) due to a restrictive domestic monetary stance; suggesting the differences between the exchange
rate pass-through of monetary policy shocks to CPI and PPI resulting from exporters’ different pricing strategies.
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Economic Policies, Political Considerations and Overall Health
Stavros A. Drakopoulos
Pages: 273-286
Abstract: Socioeconomic factors play a crucial role in determining physiological and psychological health levels of the population. The level of unemployment, income inequality and poverty levels are largely affected by economic policies and the economic cycles. Economic policies can also influence the occurrence of economic cycles which in turn influence socioeconomic factors and therefore health inequalities. Economic policies are influenced by political considerations as the historical record of many countries indicates. The paper discusses the conduct and the effects of economic policy on health inequalities. It starts with a discussion of the need and of the instruments of economic policy and also its effectiveness in smoothing the economic cycle. It also examines the interplay between main policy targets such as unemployment and inflation with political considerations. Finally, it concentrates on the effects of economic policies for health inequalities in view of economic recessions.
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