http://hdl.handle.net/2123/7929 2013-06-18T22:06:30Z http://hdl.handle.net/2123/8007 Title: Keynes’s economics and the question of public debt Authors: Dwyer, Jack Abstract: The Global Financial Crisis generated renewed interest in the relevance of John Maynard Keynes’s economic policy proposals, particularly those related to budget deficits, public debt and government expenditure. ‘Keynesian’ economic policies are commonly understood as entailing short-run fiscal activism, by which is meant discretionary, counter-cyclical fiscal policy together with deliberate budget deficits. However, this was not Keynes’s actual position. In the General Theory Keynes contended that demand-deficiency was a permanent problem in a modern capitalist economy. Seen in this light, Keynes’s central policy concern was with maintaining full employment through a permanent enlargement of the public sector and associated public expenditures. Keynes also held a rather conservative view towards public debt and was opposed to debt-financed current expenditure. This thesis reappraises Keynes’s policy views by reference to the relevant primary and secondary materials. Particular attention is given to Keynes’s much neglected policy writings contained in the 1942-45 Treasury Memoranda. The core logic of Keynes’s policy position is then captured in an illustrative model of a demand-led economy. Keynes’s central policy objectives are represented by requiring that the growth in public expenditure is sufficient to maintain full employment, but subject to a debt sustainability constraint. 2012-01-04T00:00:00Z http://hdl.handle.net/2123/7947 Title: The Macroeconomic Effects of Quantitative Easing Authors: Swain, Richard Abstract: The recent crisis has raised two key macroeconomic issues. First, has the quantitative easing policy pursued by the Federal Reserve had an effect on output, employment and prices? Second, whether ‘quantitative easing,’ is a mechanism through which monetary policy may continue to be able to stimulate economic activity despite the presence of the zero lower bound and various financial market frictions. This paper surveys the recent empirical evidence of the policy having a substantial impact on various interest rates in the United States because of certain financial frictions. It then uses this evidence to analyse the macroeconomic effects of the quantitative easing policy by simulating a New Keynesian macroeconomic model shown to closely fit the U.S. economy. It is concluded that the quantitative easing policy has had an impact on output, prices and employment, irrespective of any plausible financial frictions arising from the GFC. The result also demonstrates that the policy could be used as a monetary policy instrument. The paper ends with an examination of the numerous avenues of research that must be pursued before a firm conclusion can be made regarding the use of quantitative easing as a viable instrument of monetary policy. 2011-12-07T00:00:00Z http://hdl.handle.net/2123/7946 Title: Mass Media and Aspiration Manipulation: An Experiment Altering Preferences Over Goals Authors: Wu, Kevin Abstract: Mass media consumption has increasingly been found to adversely impact upon psychological states but research has largely neglected the potential influence of media on aspirations. An experiment demonstrates aspirational incomes to be dramatically altered by a textual narrative despite it not presenting any new information. The narrative is constructed to elicit peer comparison effects, a common element of a variety of media formats. The effect of the narrative rapidly dissipates when concentration is redirected to unrelated tasks however, suggesting any influence media presentations have on aspirations may only be fleeting. Nevertheless the results suggest that mass media might currently be augmenting aspirations with potential implications for satisfaction levels, educational attainment and risk preferences. Also the results imply preferences can be altered without new information being presented, a violation of individual decision making theory. An amendment to the theory is proposed. 2011-12-07T00:00:00Z http://hdl.handle.net/2123/7945 Title: A Search Theory of Dowry Authors: Walsh, Conor Abstract: Dowries have traditionally been viewed in economics as arising from a supply imbalance of the marriage market which disadvantages women. In this thesis, a different cause is proposed. Dowries are modelled as arising from an intertemporal bargaining process in a frictional search market, with differential aging in favour of men. This extends the insights of the standard model and is able to explain several puzzling stylised facts. Most notably, dowries may occur when there are more men than women in the market, and dowry and brideprice can coexist in the same market. The model is extended to include heterogeneous males of different quality. 2011-12-07T00:00:00Z http://hdl.handle.net/2123/7944 Title: Trend Inflation and Inflation Persistence in Australia: A New Keynesian Perspective Authors: Yadav, Anirudh Abstract: The true nature of inflation dynamics is an ongoing matter of debate and investigation in modern macroeconomics. That such attention is devoted to the dynamics of inflation is due to its importance, not only for understanding the nature of business cycles, but also for determining the appropriate path for monetary policy. Modern models of inflation are typically derived from the seminal contributions of Calvo (1983) and Taylor (1980) which imply a purely forward-looking New Keynesian Phillips curve (NKPC) where inflation depends on its future expectation and the level of real marginal costs. Despite its theoretical elegance, the purely forward-looking incarnation of the NKPC has been shown to perform poorly against the data. The empirical shortcomings of the NKPC are generally attributed to its inability to replicate the innate persistence which is present in inflation (see, for example: Fuhrer and Moore, 1995). In order to enhance the degree of persistence within the model several authors have proposed somewhat ad-hoc rationales for the inclusion of lagged inflation terms in the NKPC (see, for example: Gali and Gertler, 1999 and Christiano, Eichenbaum and Evans, 2005). While these `hybrid Phillips curves' do indeed improve the fit of the model, their questionable microfoundations are an obvious source of criticism. This thesis attempts to ascertain the extent to which inflation dynamics in Australia can be explained by the NKPC without having to rely on arbitrary backward-looking terms that have limited structural meaning. In particular, this analysis considers whether an adapted version of Cogley and Sbordone's (2008) extended model of timevarying trend inflation is suffcient to explain inflation persistence in Australia without the need for a backward-looking term in the NKPC. 2011-12-07T00:00:00Z http://hdl.handle.net/2123/7943 Title: Impure Altruism and the Volunteering Puzzle Authors: Lilley, Andrew Abstract: There have been few attempts to model the behavioural microfoundations of charitable giving, particularly with regard to the choice between giving money and volunteering. An hour of a volunteer’s time is usually of a lower worth to the charity than a donation of their hourly market wage. However the aggregate levels of donations of money and time are approximately equal in value– a fact long regarded by economists as the “volunteering puzzle”. To provide a solution to this puzzle, this thesis proposes a theoretical model of pure and impure altruism and confirms its predictions with an experiment. Donors are shown to derive a “warm glow” from volunteering which is greater than the warm glow from monetary donations. The thesis also develops a novel measure to estimate the cost and scale of impure altruism. Approximately two thirds of the utility derived from charitable donations is from impure motivations, and the remaining third is pure. Consistent with this finding, the experiment shows that priming the pure motivations in donors reduces the overall provisioning of charity. 2011-12-07T00:00:00Z http://hdl.handle.net/2123/7942 Title: The Right Carrot for an Unruly Jungle Authors: Baharlou, Kusha Abstract: This thesis examines the U.S. Department of Justice leniency program setup involving both corporate and individual leniency. Specifically, the interaction between corporate and individual leniency programs in concurrent operation, the design of optimal leniency program structure to elicit corporate leniency applications and the behaviour of economic agents subject to such programs comprise the primary directions of this thesis. In addressing corporate malfeasance under the option to apply for leniency, the intra-firm interplay of agents is modeled as a dynamic game of incomplete information. The principle findings are that if agents are symmetric in their access to leniency the concurrent operation of corporate and individual leniency programs is suboptimal as the presence of the individual leniency program detracts from corporate leniency applications due to a reallocation of incentives to report. On the other hand, under asymmetric access it is in fact optimal to utilise both leniency programs concurrently as there is no distortion in incentives to report but rather a threat effect in motion. Agent access to these leniency programs is imperative in determining the success of the combinatory policy structure. 2011-12-07T00:00:00Z http://hdl.handle.net/2123/7941 Title: More lottery tickets than milk and no money in the bank Authors: Bakhtiar, Fayzan Abstract: A significant proportion of US households have insufficient savings to cope with even moderate consumption shocks that can result in substantial externalities. At the same time, the most financially fragile households have the highest level of lottery expenditure as a proportion of income. A product which exploits the demand for lottery tickets, a prize-linked savings account, could ‘nudge’ at-risk households to save more. Prize-linked savings accounts offer individuals a savings product with principal-security and the chance to win a lottery-type jackpot. Using an online experiment, this thesis finds that the introduction of prize-linked savings accounts significantly increases the total level of savings, and reduces lottery expenditures and current consumption. The results imply that the introduction of prize-linked savings is a plausible policy option to nudge savings in the right direction, and improve welfare. 2011-12-07T00:00:00Z http://hdl.handle.net/2123/6655 Title: Commitment Mechanisms and Blood Donation Authors: Craig, Ashley Abstract: The Australian Red Cross Blood Service (ARCBS) recently introduced a policy of compulsory appointments for blood donations. This thesis examines the effect of these appointments on donor satisfaction and donation behaviour. Overall, aggregate tests indicate that the policy transition initially had a negative effect. However, conditional on having donated once after the transition, donors are more likely to return. In order to isolate individual mechanisms that contribute to these results, a survey of blood donors is used to test two specific theories from behavioural economics. On the positive side, appointments are found to increase the likelihood that a donor will return, possibly by circumventing a problem of time-inconsistent preferences. However, the results also support a theory from the marketing literature that appointments change donors' expectations, causing wait time to be more negatively perceived. Furthermore, this is found to cause a significant change in donors' intended actions. 2009-10-01T00:00:00Z http://hdl.handle.net/2123/6614 Title: Asset Prices, Monetary Policy and Macroeconomic Stability Authors: Stone, Sophie Abstract: A focal point of macroeconomic policy analysis over the past decade has been whether central banks should respond to changes in asset prices. This thesis addresses the question from the distinct perspective of equilibrium determinacy. By obtaining the conditions for equilibrium determinacy, it is possible to ascertain whether a central bank could induce additional volatility in an economy by adopting a monetary policy rule which incorporates asset prices. This thesis employs a New Keynesian model with a nancial accelerator developed by Bernanke, Gertler and Gilchrist (1999) to analyse the e¤ects on equilibrium determinacy. In contrast to most of the related literature, the principal finding of this thesis is that a central bank can respond to asset prices without inducing additional volatility in the economy. Moreover, responding to asset prices actually decreases the likelihood of indeterminacy. This can be attributed to the substitutability between responding to inflation and asset prices present in a New Keynesian model with a financial accelerator. The key implication is that central banks should take asset prices into account when designing monetary policy. 2009-01-01T00:00:00Z http://hdl.handle.net/2123/6613 Title: The Hold-up Problem in the Presence of Free Trade Agreement Negotiations Authors: Wei, Wenjie Abstract: This paper examines how the underinvestment that results from the hold-up problem is affected when there is some probability of reaching a free trade agreement (FTA). This paper examines the canonical domestic hold-up problem in an international context. It considers an input supplier undertaking one-sided cost-reducing relationship-specific investment to produce an input for a final-good producer. Once the FTA is reached, both the final-good producer and input supplier face foreign competition. This study finds that it is possible for the presence of FTA negotiations to either aggravate or alleviate the domestic hold-up problem. The total effect of the presence of FTA negotiations on ex-ante investment incentives can be decomposed into an “output competitive effect” and an “input substitution effect”. Both effects can be further decomposed into a “strategic effect” and a “cost effect”. The fundamental driving forces behind the “strategic effect” and “cost effect” are the characteristics of the cost function for the non-standardised input, the characteristics of the final-good’s demand function, and the relative efficiency of the two final-good producers in the two countries. In addition, the probability of reaching the FTA serves as an “intensifier” of the aggravation or alleviation. The modification cost of the foreign input serves as a “protector” for the domestic non-standardised input against competition from the cheaper foreign substitutes. 2010-01-01T00:00:00Z http://hdl.handle.net/2123/6441 Title: Ethnic Conflict: A Model of Concessions Authors: Samuel, Thampapillai Abstract: The Coase Theorem suggests that the ability of completely informed agents to make transfers should generally avert conflict. This thesis considers a complete information model of ethnic conflict where the dominated group consists of heterogeneous agents, but the dominant group can only bargain with the dominated group as a whole. This broadly captures a political system with race-based parties and coalitions. Moreover in this thesis the dominant group can make credible ex-ante transfers to the dominated group outside a standard bargaining framework. Then conditions arise where conflict occurs. 2008-01-01T00:00:00Z http://hdl.handle.net/2123/6440 Title: Equilibrium Price Dispersion: A Model of Intermediated Search with Repeated Interaction Authors: Cusbert, Thomas Abstract: This thesis develops a model in which homogeneous producers and merchants interact repeatedly in a search market. Merchants are able to reduce the cost of search by o ering trading certainty to pro- ducers with whom they have a preexisting relationship. Equilibria are characterised in Markov strategies, and it is found that price- dispersed equilibria exist in asymmetric strategies. Conditions in which a price-dispersed equilibrium can be welfare improving com- pared to a single-price equilibrium are found, and two extensions to the basic model are provided. 2008-01-01T00:00:00Z http://hdl.handle.net/2123/6439 Title: Pricing Decisions by Australian General Practitioners Authors: Gilboud, Elina Abstract: In the Australian market for primary healthcare, some General Practitioners (GPs) bulk bill patients while others charge them a direct fee. The prevalence of these two fee structures means that patients are paying different prices for the same service. From a policy perspective, universal bulk billing is preferred since this leads to more equitable access to free primary healthcare. The empirical observation that bulk billing and fee charging GPs can exist in a single location has not been explained in the literature. This thesis seeks to explain the observation by differentiating GPs into those who provide long consultations and those who provide short consultations. Given the nature of policy in the market, these two types of GPs have different incentives when deciding whether to bulk bill or charge a fee. The hypothesis put forward in this thesis is that GPs who have long consultations will prefer to charge a fee while GPs who have short consultations will prefer to bulk bill. 2008-01-01T00:00:00Z http://hdl.handle.net/2123/2256 Title: Street Vendors tackle the Newsvendor Problem: An Experimental Inquiry into the Big Issue Authors: Bailey, Nicholas Abstract: The Big Issue is a not-for-profit organisation that gives homeless people the opportunity to reclaim ownership over their lives by selling a street magazine. The vendors must purchase the magazine from the Big Issue office before making sales, and may do so multiple times each day. The vendors hence face the economic problem of how to construct an order plan given multiple, costly opportunities to replenish. This paper solves the problem theoretically and conducts an experiment with actual Big Issue vendors which tests how their ordering behaviour departs from the optimal solution. The experiment reveals various types of orderers exist, and that some of these systematically perform worse than others. The results also suggest that ordering decisions are heavily influenced by an anchoring heuristic. The experiment ultimately aims to test the effectiveness of a policy recommendation in improving ordering behaviour by setting minimum order quantities and offering vendors a refund for unsold magazines. The effect of the policy is different for each behavioural grouping of vendors. Some vendors demonstrate improved behaviour, while others do not. Based on the results of the experiment, a policy is formulated that will improve the profits of some vendors, without impinging upon the profits of any other behavioural types. This policy is designed so that it is sympathetic to the non-economic goals of the Big Issue. 2008-03-16T23:13:48Z http://hdl.handle.net/2123/2251 Title: What Determines Australia's Foreign Equity Investment? Authors: Pendle, Lara Abstract: In light of the recent changes to superannuation policy in Australia, the corresponding heightened exposure to equity markets has highlighted the importance of portfolio diversification as a means to reduce income risk. The International Capital Asset Pricing Model of Sharpe (1964) and Lintner (1965) suggests that in order to obtain maximum gains from diversification, investors hold too little wealth in foreign assets. This large discrepancy between theory and data is known as the home income bias puzzle and still remains robust despite the recent liberalisation of financial markets and removals of direct barriers to investment. This thesis empirically investigates the distribution of Australian holdings of foreign equities and considers the determinants of equity home bias for a sample of 25 countries. The IMF's high quality Coordinated Portfolio Investment Survey (CPIS) dataset is appropriate for this purpose and is utilised over the period 2001 to 2005. The key findings are that indirect barriers to international investment and information costs are important factors behind international investment patterns and the home bias puzzle. 2008-03-11T22:22:35Z