Melbourne Institute of Applied Economic and Social Research - Research Publications
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ItemWhat Do We Know About the Macroeconomic Effects of Fiscal Policy? A Brief Survey of the Literature on Fiscal Multipliers(Wiley, 2019-03-01)This article discusses recent research on the macroeconomic effects of fiscal policy—the theme of the 2018 edition of the Melbourne Institute Macroeconomic Policy Meeting. We review recent research findings on the effects of fiscal multipliers in normal times, during booms/busts, and in the presence of the zero lower bound. Studies on the effects of fiscal policy in open economy settings as well as contributions on the fiscal‐monetary policy mix are also considered. We conclude by outlining a few research avenues that are particularly relevant from a policy standpoint.
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ItemInterest Rates, Local Housing Markets and House Price Over-reactions(WILEY, 2018-06)Understanding the effects of interest rates on city‐specific house price to household income ratios is important for managing local housing markets. In particular, there is concern that keeping interest rates at sufficiently low levels can distort the relationship between local house prices and fundamentals. We use house price to income ratios across capital cities in Australia to investigate this issue and show that there is a national interest rate ‘transition’ point below which housing dynamics can become unstable. This result lends support to the presence of a duration‐dependent threshold effect (hitherto mainly explored in theoretical models).
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ItemLABOR'S SHARE, THE FIRM'S MARKET POWER, AND TOTAL FACTOR PRODUCTIVITY(WILEY, 2018-10)We investigate the relationship between labor's share, firm's market power, and the elasticity of output with respect to labor input using an approach based on an unobserved components model. The approach yields time‐varying estimates of market power and the elasticity. Evidence on the market power of firms (which we find to be rising since 2000) gives a deeper understanding of movements in labor's share and the labor wedge. The generated values of the elasticity yield revised estimates of total factor productivity growth which is informative about the extent of the downward bias inherent in traditional estimates which use labor's share as a proxy for the elasticity. (JEL O47, C32, E25)
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ItemMacroeconomic Policies in a Low Interest Rate Environment: Back to Keynes?(WILEY, 2018-03)ABSTRACT This article discusses macroeconomic policies in a low interest rate environment, the central theme of the 2017 edition of the Melbourne Institute Macroeconomic Policy Meeting. After reviewing possible causes of the decline in interest rates observed since the 1990s, we present and discuss some of the challenges that monetary and fiscal policy face in a ‘new normal’ environment characterised by a real natural interest rate close to zero. Proposals by leading researchers on how to operate in such an environment are presented and discussed. We conclude by outlining some research questions that are highly relevant from a policy perspective.
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ItemNo Preview AvailableThe Australian Economy in 2020–21: The COVID‐19 Pandemic and Prospects for Economic Recovery(Wiley, 2021)This article summarises developments in the Australian economy in 2020. It describes the economic growth and labour market ramifications associated with COVID-19, and the fiscal and monetary policies implemented to help counter its effects. COVID-19 has resulted in considerable slack in an economy that was weak pre-pandemic. While current policies are appropriately focused on stimulating demand and supporting employment, existing challenges such as weak growth in productivity, gross domestic product and real wages are also likely to remain relevant post-pandemic.
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ItemIntroduction to the Policy Forum: Macroeconomic Consequences of Macroprudential Policies(Wiley, 2016-03)This policy forum summarises the proceedings of the 2015 Melbourne Institute Macroeconomic Policy Meeting, which took place at the Melbourne Institute on 15–16 October. The focus of this conference was on macroprudential policies. Section 2 provides a brief description of the papers presented and the keynote address. Section 3 refers to the remarks of the panel on ‘Macroprudential Policies in Australia: Design and Effects’, and the discussion. Section 4 concludes.
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ItemRevisiting the Okun relationship(Taylor & Francis, 2017)Our article revisits the Okun relationship between observed unemployment rates and output gaps. We include in the relationship the effect of labour market institutions as well as age and gender effects. Our empirical analysis is based on 20 OECD countries over the period 1985–2013. We find that the share of temporary workers (which includes a high and rising share of young workers) played a crucial role in explaining changes in the Okun coefficient (the impact of the output gap on the unemployment rate) over time. The Okun coefficient is not only different for young, prime-age and older workers but also it decreases with age. From a policy perspective, it follows that an increase in economic growth will not only have the desired outcome of reducing the overall unemployment rate but it will also have the distributional effect of lowering youth unemployment.
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ItemBank learning, terms of trade shocks and currency risk: Should only inflation matter for monetary policy?(ELSEVIER SCI LTD, 2007-10)
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ItemInflation targeting, learning and Q volatility in small open economies(ELSEVIER SCIENCE BV, 2007-11)
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ItemLearning and the monetary policy strategy of the European Central Bank(Elsevier BV, 2004-11-01)