Economics - Research Publications

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    The Dynamics of Structural Transformation in Australia, 1960-2020
    Chindamo, P ; Martin, VL (WILEY, 2022-09)
    A dynamic long‐run general equilibrium framework based on a structural vector error correction model is used to study the factors determining the structural transformation of the Australian economy from 1960 to 2020. Three sets of shocks are identified: demand shocks through aggregate consumption, supply shocks caused by changes in relative prices across industries, and shocks arising from deviations between observed and long‐run industry employment shares. The empirical results highlight the importance of all shocks in causing the structural transformation of the Australian economy across industries and over time. The results are found to be robust to a range of sensitivity experiments.
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    Modeling time varying risk of natural resource assets: Implications of climate change
    Leroux, AD ; Martin, VL ; St John, KA (WILEY, 2022-01)
    A multivariate GARCH model of natural resources is specified to capture the effects of time varying portfolio risk. A special feature of the model is the inclusion of realized volatility for natural resource assets that are available at multiple frequencies as well as being sensitive to sudden changes in climatic conditions. Natural resource portfolios under climate change are simulated from bootstrapping schemes as well as being derived from global climate model projections. Both approaches are applied to a multiasset water portfolio model consisting of reservoir inflows, rainwater harvesting, and desalinated water. The empirical results show that while reservoirs remain the dominant water asset, adaptation to climate change involves increased contributions from rainwater harvesting and more frequent use of desalinated water. It is estimated that climate change increases annual water supply costs by between 7% and 44% over a 20‐year forecast horizon.
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    Once in a Lifetime? The Effects of the Global Financial Crisis on Household Willingness to Take Financial Risk
    Cardak, BA ; Martin, VL (Wiley, 2019-11-06)
    We investigate the effect of the global financial crisis (GFC) on household willingness to take risk. A model incorporating experienced returns as a determinant of risk tolerance is specified, with time‐varying weights on past stock returns capturing changes during the crisis. Results show that households became more myopic during the GFC, placing greater weight on more recent stock returns when evaluating financial risk attitudes. Households have been more sensitive to financial shocks during the GFC and post‐GFC periods, with the change in sensitivity found to be uniform over the life cycle and other household characteristics, but differing by income.
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    Efficient method of moments estimators for integer time series models
    Martin, VL ; Tremayne, AR ; Jung, RC (John Wiley & Sons, 2014-11)
    The parameters of integer autoregressive models with Poisson, or negative binomial innovations can be estimated by maximum likelihood where the prediction error decomposition, together with convolution methods, is used to write down the likelihood function. When a moving average component is introduced this is not the case. To address this problem an efficient method of moment estimator is proposed where the estimated standard errors for the parameters are obtained using subsampling methods. The small sample properties of the estimator are investigated using Monte Carlo methods, while the approach is demonstrated using two well-known examples from the time series literature.
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    Financial contagion and asset pricing
    Fry-McKibbin, R ; Martin, VL ; Tang, C (ELSEVIER, 2014-10)
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    Microblogging and Life Changes: An Ethnographic and Statistical Analysis of Young Adults
    MARTIN, VL ; Chen, X ; Berry, M (The International Academic Forum (IAFOR), 2014)
    Microblogging has revolutionized people's interaction on the web. This paper investigates the changes in the microblogging practices of young adults after they have experienced life changing events associated with studying and working overseas. To test for the presence of significant changes in microblogging behaviour the empirical analysis focusses on young Chinese adults who have moved to Australia to study and/or work. The data consists of a three-tier approach, with the first tier being based on questionnaires; the second tier consists of formal in-depth interviews; while the third tier involves an ethnographic analysis of online and offline participant behaviour as well as information collected from two focus groups. The behavioural changes of the participants are analysed using a range of statistical models which take into account microblogging practices relating to social media platform choices, behavioural strategies and frequency. Formally this involves using panel ordered probit models to identify potential significant changes in social media practices. In specifying the empirical models, key demographic attributes characterizing the participants are also incorporated into the analysis, including gender, age, location, duration, education, enrolment status and work status. The empirical results reveal evidence of significant changes in key social media practices of Chinese young adults in moving from China to Australia. Keywords: social media, study overseas, work overseas, three-tier approach. Official conference proceedings published by IAFOR are available at: http://iafor.org/issn-2186-5906-the-asian-conference-on-media-mass-communication-2014-official-conference-proceedings/
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    Hedging Supply Risks: An Optimal Water Portfolio
    Leroux, AD ; Martin, VL (Oxford University Press, 2016)
    Although water supply diversification has been proposed as a solution to dwindling water reserves, the optimal mix of natural and manufactured sources of water remains largely unexplored. We develop a dynamic portfolio model of water supply that hedges against the supply risks from all potential water sources, by taking into account the size of water reserves, uncertainties of water flows as well as differences in supply costs. The optimal portfolio shares for an existing water supply system are derived and compared with the observed contributions to total water stock, revealing unexploited hedging opportunities between various naturally occurring water sources as well as a general over-reliance on manufactured water. The optimal solution implies that future supply augmentations should target natural sources of water ahead of manufactured water. It is estimated that the optimization of the water supply portfolio for a medium-sized city results in annual cost-savings of up to $463 million.
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    A comparison of alternative tests of contagion with applications
    DUNGEY, M. ; FRY, R. ; GONZALEZ-HERMOSILLO, B. ; MARTIN, V. (Oxford University Press, 2005)
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    The role of portfolio shocks in a structural vector autoregressive model of the Australian economy
    Fry, R ; Hocking, J ; Martin, VL (BLACKWELL PUBLISHING, 2008-03)
    Domestic and foreign equity shocks on the Australian economy are analysed within a five‐variate structural vector autoregressive model, with identification achieved through long‐run restrictions based on the natural rate hypothesis, monetary neutrality, long‐run portfolio balance and purchasing power parity. The results show that real equity values were undervalued by 19 per cent by June 2005, with the gap narrowing thereafter. Foreign crises are important factors explaining this deterioration. The real wealth effects of equity market shocks impact significantly upon financial and goods market prices, whereas output tends to be immune. The model is also able to address puzzles that exist in the vector autoregression literature.
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    Implicit Bayesian inference using option prices
    Martin, GM ; Forbes, CS ; Martin, VL (BLACKWELL PUBL LTD, 2005-05)
    Abstract.  A Bayesian approach to option pricing is presented in which posterior inference about the underlying returns process is conducted implicitly via observed option prices. A range of models allowing for conditional leptokurtosis, skewness and time‐varying volatility in returns are considered, with posterior parameter distributions and model probabilities backed out from the option prices. Models are ranked according to several criteria, including out‐of‐sample predictive and hedging performance. The methodology accommodates heteroscedasticity and autocorrelation in the option pricing errors, as well as regime shifts across contract groups. The method is applied to intraday option price data on the S&P500 stock index for 1995. While the results provide support for models that accommodate leptokurtosis and skewness, no one model dominates when all criteria are considered.