https://hdl.handle.net/2123/194 2026-06-04T20:17:39Z https://hdl.handle.net/2123/33961 Policy-at-Risk: The Effects of Financial Conditions on the Conduct of Monetary Policy in Australia Deitch, Nathaniel The global financial crisis (GFC) of the late 2000s marked an important event in terms of changing attitudes towards prudential and financial regulation. However, it also demonstrated the close connectivity between financial conditions and macroeconomic performance. It is therefore important to understand the influence of changing financial conditions on the conduct of monetary policy by central banks, particularly how central banks respond to these changes. This thesis constructs a financial conditions index (FCI) for Australia to represent the state of financial conditions between 1976 and 2023. I use a two-stage regression model as part of a novel policy-at-risk (PaR) model to assess the effects of financial conditions on monetary policy first at the mean level, and secondly at different quantiles along the distribution of interest rate changes. I also assess the uncertainty associated with monetary policy over time by plotting the conditional distribution of the overnight cash rate (OCR) together with its fitted quantiles. The findings reveal that when the OCR is low relative to systematic policy, the Reserve Bank of Australia (RBA) is less responsive to changes in financial conditions, resulting in smaller interest rate cuts. Conversely, the RBA reacts more strongly to financial conditions when the OCR is relatively high. 2025-06-02T00:00:00Z https://hdl.handle.net/2123/33908 Does the composition of credit matter for Australian monetary policy transmission? Doherty, Sophie The composition of credit is rarely discussed when quantifying the role of credit in Australian monetary policy transmission. As the share of household and business credit has changed, it is important to understand whether the composition will matter for monetary policy transmission. I use a SVAR model to quantify the sensitivity of household and business credit to monetary policy finding relatively symmetric responses for all components. However, the SVAR model fails to account for the changing share of household and business credit. Implementing a DSGE model with credit, I construct three compositions representative of Australia’s credit composition since 1992. Household credit is shown to be more sensitive to a tightening of monetary policy as the share of household credit increases, as has occurred in Australia. Meanwhile, a business-dominant composition will propagate monetary policy shocks to investment and output. Furthermore, a shock to borrowing constraints implies the gradual change in credit composition will impact Australia’s financial stability more broadly as business credit has the strongest relationship with macroeconomic variables. As the share of business credit has gradually declined, the effectiveness of monetary policy transmission through credit to key macroeconomic variables may have decreased. 2025-05-14T00:00:00Z https://hdl.handle.net/2123/33664 Trend-cycle decomposition in the presence of large shocks Kamber, Gunes; Morley, James; Wong, Benjamin We introduce some refinements of the Beveridge-Nelson filter to help address possible distortions from large shocks. We then compare how the Beveridge-Nelson filter and other popular univariate trend-cycle decomposition methods perform given the extreme outliers associated with the Covid recession. Real-time estimates of the output gap based on the Hodrick-Prescott filter are highly unreliable in the years just prior to the pandemic, although the revised estimates during the pandemic are similar to those of the more reliable Beveridge-Nelson filter. The Hamilton filter suffers from base effects that produce a mechanical spike in the estimated output gap exactly two years after the onset of the pandemic, in line with the filter horizon. Given projected data with a simulated Covid-like shock, both the Hodrick-Prescott and Hamilton filters overstate the true reduction in the output gap and fail to capture the implied movements in trend output. The Hodrick-Prescott filter generates a spurious transitory boom just prior to the simulated shock, while the Hamilton filter produces another mechanical spike exactly two years after the simulated shock, as well as an ongoing divergence in forecasted values of the output gap away from zero. Only the Beveridge-Nelson filter correctly forecasts trend and cycle movements when faced with a Covid-like shock. 2025-01-01T00:00:00Z https://hdl.handle.net/2123/32753 Zero Interest Policy & the New Abnormal: A Critique, by Michael Beenstock (Oxford University Press, Oxford, UK, 2022) Morley, James Book review of Zero Interest Policy & the New Abnormal: A Critique, by Michael Beenstock (Oxford University Press, Oxford, UK, 2022) 2024-01-01T00:00:00Z https://hdl.handle.net/2123/32590 Promotion and demotion contests Levy, Jonathan; Zhang, Jingjing With a fixed prize budget, to increase total effort, we design a two-stage lottery contest where heterogeneous agents face the prospect of promotion and the threat of demotion from one stage to the next. We develop two competing theoretical models to generate predictions about behavior: (i) the standard economic model and (ii) a behavioral model where agents derive non-monetary utility from winning. The experimental results provide strong support for the use of promotion and demotion in contests when abilities are homogeneous, however, they do not provide strong support for the use of promotion and demotion in contests when ability differences are large. Our experimental results are consistent with the predictions made by the behavioral model. 2024-01-01T00:00:00Z https://hdl.handle.net/2123/32586 It’s not you (well, it is a bit you), it’s me: Self- versus social image in warm-glow giving Grossman, Philip J.; Levy, Jonathan Attempts by charities to motivate giving tend to focus on potential donors’ altruistic tendencies. However, prior research suggests that approximately 50% of individuals are to some extent motivated by warm glow, the satisfaction received from the act of giving. The satisfaction derives from looking good to themselves (self-image) and/or to others (social image). We conduct an online experiment on MTurk participants (n = 960) with a more realistic simulation of being watched to determine the importance of self- and social image to warm-glow giving. We find evidence that suggests that social image concerns do not increase the likelihood that someone will give but they do increase the amount given; average giving is significantly higher in the treatments when feelings of being watched are stimulated. Our results suggest that charities looking to increase their donor bases might effectively do so by focusing on self-image concerns. Charities wishing to increase the amount donated might effectively do so by focusing on the social image concerns of the donor. 2024-01-01T00:00:00Z https://hdl.handle.net/2123/32193 Did marginal propensities to consume change with the housing boom and bust? Cho, Yunho; Morley, James; Singh, Aarti We extend a widely used semi-structural model to identify and estimate dynamic consumption elasticities with respect to transitory income shocks. Applying our model to household survey data, we find a structural break in marginal propensities to consume following the end of the housing market boom, with the average across households increasing significantly. There is important heterogeneity by different household balance sheet characteristics, and the increase in the average appears to be driven by higher short-run consumption elasticities for homeowners with low liquid wealth. The change in consumption behavior is consistent with tighter borrowing constraints more than a shift in wealth distributions. 2024-01-01T00:00:00Z https://hdl.handle.net/2123/31865 Retaining Australian Nurses: An Analysis of Nurses’ Wages and Exit Rates Sharma, Geena This study examines the factors influencing Australian nurses’ decisions to leave the nurse profession, describes the pathways that nurses take after leaving the profession, and estimates the average wage change associated with a nurse changing professions. Using longitudinal data from the Australian Household, Income, and Labour Dynamics in Australia Survey and panel data estimation methods, we find that a nurse’s pre-exit hourly wage is significantly associated with a nurse’s exit decision, whereby higher wages are associated with greater risk of exit. Other significant risk factors are age, childbirth, residential location change and tertiary qualifications. We also find that most nurses stay within the health care sector when quitting their job. These job transitions are characterised by significant increases in hourly wages and occupational prestige, suggesting that nurses who change jobs do so for better job opportunities. This holds true in particular for nurses with tertiary education. We conclude that nurse exit decisions are not associated with loss in human capital for the healthcare sector overall, but if the policy objective is to address nurse shortages by retention rather than new admissions, then higher wages would have to be paid. 2023-11-14T00:00:00Z https://hdl.handle.net/2123/31829 Does the Survey of Professional Forecasters help predict the shape of recessions in real time? Eo, Yunjong; Morley, James An updated version of our Markov-switching model of U.S. real GDP suggests the COVID-19 recession was more U-shaped than L-shaped. As with linear time series models, it is important to account for extreme outliers during the pandemic, but a simple decay function for volatility from 2020Q2 leads to robust inferences. When considering whether our model could have predicted the shape of recessions in real time, we find that feeding in data from the Survey of Professional Forecasters accurately predicts the nature of recovery at the time of the trough for each of the last four recessions, including the COVID-19 recession. 2023-01-01T00:00:00Z https://hdl.handle.net/2123/31625 Quarterly data for examining water market functionality in the sMDB Zhao, Maruge; Ancev, Tiho; Vervoort, R.Willem This dataset provides quarterly statistics generated based on transactional level water trading data for key trading zones in the sMDB. All market transaction data were sourced from NSW and VIC state water registers. Ratios of irrigation water in a trading zone devoted to cotton and fruit & nut trees were calculated based on farm survey data provided by ABS. Quarterly rainfall data is based on monthly rainfall data provided by BoM and further processed by ABARES for catchment level analysis. 2023-08-30T00:00:00Z https://hdl.handle.net/2123/30192 Monetary Policy and Inequality in Australia Mendes, Sofia Australia has experienced growing income and consumption inequality over the past three decades. As interest rates rise, it is important to understand the impact of monetary policy on household income and consumption. This thesis uses data from the Household, Income and Labour Dynamics in Australia survey to investigate the distributional effects of monetary policy and the channels through which monetary policy transmits to households. I use the local projections method and find that monetary policy has distributional effects. When interest rates rise, earnings inequality worsens and consumption inequality decreases. I find that the distributional effects of monetary policy are transmitted through the earnings heterogeneity, income composition, and portfolio composition channels. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/30116 Financialisation and Income Distribution in Australia: Theory and Evidence Reinhard, Joey Arnold While rising income inequality and financialisation are widely recognised as prominent features of advanced capitalist economies, theoretical explanations of these phenomena, and how they interact, have varied significantly. Many of these explanations involve the construction of all-encompassing cross-country narratives, which result in a lack of analytical specificity. By framing inequality through the lens of the functional distribution of income, and focusing on the case study of Australia, this thesis aims to paint a detailed picture of what the financialisation-income distribution nexus can look like in practice. The key theoretical approach adopted is a Sraffian model of financialisation, which proposes that an increase in the relative size of the financial sector, higher financial sector productivity, and reduced labour bargaining power, lead to a fall in the wage share of income. This model is synthesised with other heterodox perspectives in order to establish a nuanced understanding of the key historical events that have driven the financialisation process in Australia. In doing so, this thesis seeks to disentangle Australia’s experience of financialisation and a falling wage share from the ambiguity of neoliberalism, deregulation, and globalisation. 2023-02-24T00:00:00Z https://hdl.handle.net/2123/29976 Estimating the euro area output gap using multivariate information and addressing the COVID-19 pandemic Morley, James; Rodriguez-Palenzuela, Diego; Sun, Yiqiao; Wong, Benjamin We estimate the euro area output gap by applying the Beveridge–Nelson decomposition based on a large Bayesian vector autoregression. Our approach incorporates multivariate information through the inclusion of a wide range of variables in the analysis and addresses data issues associated with the COVID-19 pandemic. The estimated output gap lines up well with the CEPR chronology of the business cycle for the euro area and we find that hours worked, more than the unemployment rate, provides the key source of information about labor utilization in the economy, especially in pinning down the depth of the output gap during the COVID-19 recession when the unemployment rate rose only moderately. Our findings confirm that labor market adjustments to the business cycle in the euro area occur more through the intensive, rather than extensive, margin. 2023-01-01T00:00:00Z https://hdl.handle.net/2123/29938 The Relationship Between Commodity Prices and Australia’s Gross Domestic Income Belobrajdic, Luka Commodities dominate Australia’s export composition. To this effect, there is a plausible relationship between commodity prices and the prosperity of Australians. Gross domestic income is chosen as a proxy for prosperity given it is better able to capture purchasing power than gross domestic product in the Australian context. Using a discrete wavelet transformation, the commodity price series is decomposed into a trend and cycle component. Following, I run a series of structural vector autoregressions for the period 1985:Q4 to 2019:Q4, as well as two sub-samples, pre and post mid-2003, in view of the increase in price and variance of commodity prices at this time. I find that both the trend and cycle components of commodity prices meaningfully impact GDI primarily via gross operating surplus, while GDP is unaffected. Although a shock to the cycle component of the commodity price series has a larger effect on GDI when compared to the trend, the impact of the trend is far more persistent. Further, for the pre mid-2003 sub-sample, commodity price changes have no discernable impact on GDI, as opposed to the post mid-2003 sample where a noticeably strong relationship exists. 2023-01-30T00:00:00Z https://hdl.handle.net/2123/29928 Being ‘Too’ Smart Doesn’t Always Pay Off; Truth-Telling in a Strategy-Proof Mechanism Symonds, Samantha In strategy-proof mechanisms truth-telling is a dominant strategy yielding optimal results for all participants, yet according to experimental evidence truthful revelation rates are worryingly low. This thesis is based on the growing realm of literature finding that participants tend not to play their dominant strategy, i.e. tell the truth, within matching markets even when given strategy-proof mechanisms. I design an experiment using the well-known Gale-Shapley Deferred Acceptance (DA) algorithm that aims to test whether using tutorials helps participants better understand that truth-telling is their optimal strategy within strategy-proof mechanisms. These tutorials allow participants to practice their approach and observe the outcome of their choices before having to commit to a final strategy. I hypothesise that participant engagement in tutorials will increase truth-telling rates in matching mechanisms and predict that given advice alone reduces rates of truthful preference revelation, participant engagement in tutorials can effectively mitigate the misleading power of advice. This thesis finds that the proportion of participants that told the truth was 3% lower if they received the tutorials compared to when no additional information was presented. However, tutorials improve on truth-telling rates compared to advice as 31% more people told the truth when given tutorials and no advice compared to if they were presented with advice alone. Additionally, participants engaging with both advice and tutorials together had truth-telling rates 11% higher than those given solely advice, which further supports the effectiveness of tutorials in overcoming the misleading effect of advice. 2023-01-25T00:00:00Z https://hdl.handle.net/2123/29926 Something New in Medical Residency Matching Markets Yu, Zhuojin Worldwide medical residency markets commonly employ variants of the two-sided central clearinghouse designed by Roth and Peranson in 1999. In the NSW physiotherapy residency matching market, a one-sided and computationally efficient matching mechanism is used – the Kuhn-Munkres algorithm. The mechanism is new for medical matching markets, with no publicly known application and no existing literature. A crucial contribution of the thesis is presenting the algorithm and starting a discussion around the Kuhn-Munkres algorithm in matching. The thesis models the iterative working of the Kuhn-Munkres algorithm. I show that the Kuhn-Munkres algorithm is rank-efficient, outcome unfair, procedurally fair and not strategy-proof. Comparing the Roth-Peranson and Kuhn-Munkres algorithms on efficiency, fairness and incentive properties, the thesis concludes that there is no settled winner between the two algorithms. The competition eventually comes down to the trade-off between cost reductions and market complexities. 2023-01-25T00:00:00Z https://hdl.handle.net/2123/29894 Can we make investors smarter using a nudge? Maybe, but we can’t prove it using the most common experimental disposition effect environment. Rogut, Nathan Investors have been shown to behave in a way that reduces their earnings by being over hesitant to sell stocks that have decreased in price and over eager to sell stocks that have increased in price, exhibiting what is known as a disposition effect. This persists even in environments that make exhibiting a disposition effect always reduce expected returns. Our study uses the most common experimental disposition effect environment to test the use of a novel nudge to reduce participants disposition effects and finds that the nudge does reduce participants’ disposition effects. However, several of our findings challenge the external and internal validity of the environment, and it is possible that the nudge only works for a subset of the population that understands the environment better. Despite the environment making diversification suboptimal, those who understand diversification (and therefore might perform better in real-world markets) perform worse in this environment due to diversifying more, indicating that participants bring their external beliefs about real world markets into the environment. We show that the optimal disposition effect in the environment is substantially negative, which critiques past studies that have used a rational benchmark of zero. We also find significantly negative disposition effects across the board for our sample, which is unique, potentially due to the inclusion of comprehension questions before trading that assisted participants to understand the environment better. 2023-01-18T00:00:00Z https://hdl.handle.net/2123/29782 How does household consumption respond to housing price changes in China? DONG, Chengxin How house price changes impact household consumption is a long-lasting debate in macroeconomics. Previous literature mainly analyses this relationship with macro-level data, while this thesis aims to identify the relationship using a micro-level dataset in the Chinese context. With OLS regression, it demonstrates that there is a positive relationship between household consumption and house price. This conclusion applies to both homeowners and non-owners during the sample period. Meanwhile, for households who are experiencing a transfer in homeownership, meaning selling or buying a house, higher house prices would also lead to higher consumption. If a household bought or sold a house, the consumption level would increase. Additionally, there exists regional heterogeneity in the relationship between family consumption and housing prices. Such heterogeneity problems also exist in households from different social hierarchies who live in different types of houses. 2022-12-09T00:00:00Z https://hdl.handle.net/2123/29614 Intergenerational disadvantage: Learning about equal opportunity from social assistance receipt Cobb-Clark, Deborah A; Dahmann, Sarah C; Salamanca, Nicolas; Zhu, Anna We use variation in the intergenerational persistence across social assistance benefits over 18 years to study the drivers of intergenerational disadvantage. Young people are more likely to receive social assistance if their parents received disability, caring, or single parent benefits, and less likely if they received unemployment benefits. Disparity in intergenerational persistence across benefit types suggests that parental bad luck has broader consequences for youth disadvantage than do their personal choices. Using the intensive margin and timing of parental social assistance to account for unobserved heterogeneity indicates that intergenerational disadvantage is more likely driven by poverty traps than welfare cultures. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/29547 Cyclical signals from the labor market Morley, James; Berger, Tino; Boll, Paul David; Wong, Benjamin We consider which labor market variables are the most informative for estimating and nowcasting the US output gap using a multivariate trend-cycle decomposition. Although the unemployment rate clearly contains important cyclical information, it also appears to reflect more persistent movements related to labor force participation that could distort inferences about the output gap. Instead, we show that the alternative U-2 unemployment rate (job losers as a percentage of the labor force) provides a more purely cyclical indicator of labor market conditions. To a lesser extent, but consistent with a link of the output gap to real labor costs in a New Keynesian setting, we also find that average hourly earnings are informative about the output gap. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/29090 Effect of lockdown on mental health in Australia: evidence from a natural experiment analysing a longitudinal probability sample survey Butterworth, P.; Schurer, S.; Trinh, T.-A.; Vera-Toscano, E.; Wooden, M. Background: Many studies have examined population mental health during the COVID-19 pandemic but have been unable to isolate the direct effect of lockdowns. The aim of this study was to examine changes in the mental health of Australians aged 15 years and older during the COVID-19 pandemic using a quasi-experimental design to disentangle the lockdown effect. Methods: We analysed data from ten annual waves (2011–20) of the longitudinal Household, Income and Labour Dynamics in Australia (HILDA) Survey to identify changes in the mental health of respondents from the pre-COVID-19 period (2011–19) to the COVID-19 period (2020). Difference-in-differences models were used to compare these changes between respondents in the state of Victoria who were exposed to lockdown at the time of the 2020 interviews (treatment group) and respondents living elsewhere in Australia (who were living relatively free of restrictions; control group). The models included state, year (survey wave), and person-specific fixed effects. Mental health was assessed using the five-item Mental Health Inventory (MHI-5), which was included in the self-complete questionnaire administered during the survey. Findings: The analysis sample comprised 151 583 observations obtained from 20 839 individuals from 2011 to 2020. The treatment group included 3568 individuals with a total of 37 578 observations (34 010 in the pre-COVID-19 and 3568 in the COVID-19 period), and the control group included 17 271 individuals with 114 005 observations (102 867 in the pre-COVID-19 and 11 138 in the COVID-19 period). Mean MHI-5 scores did not differ between the treatment group (72·9 points [95% CI 72·8–73·2]) and control group (73·2 points [73·1–73·3]) in the pre-COVID-19 period. In the COVID-19 period, decreased mean scores were seen in both the treatment group (69·6 points [69·0–70·2]) and control group (70·8 points [70·5–71·2]). Difference-in-differences estimation showed a small but statistically significant effect of lockdown on MHI-5 scores, with greater decline for residents of Victoria in 2020 than for those in the rest of Australia (difference –1·4 points [95% CI –1·7 to –1·2]). Stratified analyses showed that this lockdown effect was larger for females (_2·2 points [–2·6 to –1·7]) than for males (_0·6 [–0·8 to –0·5]), and even larger for women in couples with children younger than 15 years (_4·4 points [–5·0 to –3·8]), and for females who lived in flats or apartments (_4·1 points [–5·4 to –2·8]) or semi-detached houses, terraced houses, or townhouses (_4·8 points [–6·4 to –3·2]). Interpretation: The imposition of lockdowns was associated with a modest negative change in overall population mental health. The results suggest that the mental health effects of lockdowns differ by population subgroups and for some might have exaggerated existing inequalities in mental health. Although lockdowns have been an important public health tool in suppressing community transmission of COVID-19, more research is needed into the potential psychosocial impacts of such interventions to inform their future use. Funding: US National Institutes of Health. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/29050 Labor Unions and Covid-19: Beyond the Workplace Naeim, Peyman Firouzi; Rahimzadeh, Golnoush Person-to-person transmission in the workplace is thought to play a crucial role in the spread of COVID-19. Labor unions are among the largest institutions in the United States, and their role in regulating employee-employer relations is hard to ignore. Costly efforts to contain the virus combined with the monopoly and collective voice faces of unions emphasize the role of unions in shaping the workforce’s response to the pandemic, where the effects can be amplified by the further transmission of the virus beyond the workplace. We utilize state-level data and a dynamic spatial probability model to quantify the total effect of both economic activities and union membership. We find that increasing economic activity by recruiting 1,000 new employees from unemployed individuals would lead to 368 more COVID-19 cases by November 2020 and before the vaccine rollout. However, increasing the union size by 1,000 while keeping the employment level constant would lead to 111 fewer COVID-19 cases in the same period. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/28685 When is discretionary fiscal policy effective? Morley, James; Fazzari, Steven; Panovska, Irina We investigate the effects of discretionary changes in government spending and taxes using a medium-scale nonlinear vector autoregressive model with policy shocks identified via sign restrictions. Tax cuts and spending increases have larger stimulative effects when there is excess slack in the economy, while they are much less effective, especially in the case of government spending increases, when the economy is close to potential. We find that contractionary shocks have larger effects than expansionary shocks across the business cycle, but this is much more pronounced during deep recessions and sluggish recoveries than in robust expansions. Notably, tax increases are highly contractionary and largely self-defeating in reducing the debt-to-GDP ratio when the economy is in a deep recession. The effectiveness of discretionary government spending, including its state dependence, appears to be almost entirely due to the response of consumption. The responses of both consumption and investment to discretionary tax changes are state dependent, but investment plays the larger quantitative role. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/28449 Zero-COVID Policies: Melbourne's 112-Day Hard Lockdown Experiment Harmed Mostly Mothers Schurer, Stefanie; Atalay, Kadir; Glozier, Nick; Vera-Toscano, Esperanza; Wooden, Mark Lockdowns were used worldwide to mitigate the spread of SARS-CoV-2. We demonstrate that the 112-day hard lockdown in Melbourne, Australia, the longest among OECD jurisdictions, exclusively penalized families with young children. To identify the causal impact of lockdown, we interrogated nationally-representative longitudinal survey data and exploited quasi- experimental variation in Melbourne’s lockdown, one that left other jurisdictions unaffected. Using difference-in-differences estimation, we found that, surprisingly, most vulnerable groups (the young, poor, lonely and those with previous mental health conditions) were left unscathed. However, we found mothers experienced significant, sizable declines in health and work hours, and increases in loneliness, despite feeling safer and being more active. Zero-COVID policies are not as harmful as may have been expected but came at high cost to mothers in society. One-Sentence Summary: Melbourne’s hard lockdown left most vulnerable groups unscathed but led to greater ill- health and loneliness in mothers. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/28447 Zero-COVID Policies: Melbourne's 112-Day Hard Lockdown Experiment Harmed Mostly Mothers Schurer, Stefanie; Atalay, Kadir; Glozier, Nick; Toscano, Esperanza; Wooden, Mark Lockdowns were used worldwide to mitigate the spread of SARS-CoV-2. We demonstrate that the 112-day hard lockdown in Melbourne, Australia, the longest among OECD jurisdictions, exclusively penalized families with young children. To identify the causal impact of lockdown on human life, we interrogated nationally-representative longitudinal survey data and quasi-experimental variation in Melbourne's lockdown, one that left other jurisdictions unaffected. Surprisingly, we found most vulnerable groups (the young, poor, lonely and those with previous mental health conditions) were left unscathed. However, we found mothers experienced significant, sizable declines in health and work hours, and increases in loneliness, despite feeling safer and being more active. Zero-COVID policies are not as harmful as may have been expected but came at high cost to mothers in society. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/28264 Poverty and food insecurity during COVID-19: Phone-survey evidence from rural and urban Myanmar in 2020 Headey, Derek; Goudet, Sophie; Lambrecht, Isabel; Maffioli, Elisa Maria; Oo, Than Zaw; Russell, Toth Myanmar first experienced the COVID-19 crisis as a relatively brief economic shock in early 2020, before the economy was later engulfed by a prolonged surge in COVID-19 cases from September 2020 onwards. To analyze poverty and food security in Myanmar during 2020 we surveyed over 2000 households per month from June-December in urban Yangon and the rural dry zone. By June, households had suffered dramatic increases in poverty, but even steeper increases accompanied the rise in COVID-19 cases from September onwards. Increases in poverty were much larger in urban areas, although poverty was always more prevalent in the rural sample. However, urban households were twice as likely to report food insecurity experiences, suggesting rural populations felt less food insecure throughout the crisis. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/27844 Estimating household consumption insurance Chatterjee, Arpita; Morley, James; Singh, Aarti Blundell, Pistaferri, and Preston (American Economic Review, 2008, 98(5), 1887–1921) report an estimate of household consumption insurance with respect to permanent income shocks of 36%. In replicating findings for their model and data, we find that this estimate is distorted by a code error and is not robust to weighting scheme for generalized method of moments (GMM) or consideration of quasi maximum likelihood estimation (QMLE), which produces a significantly higher estimate of consumption insurance at 55%. For sub-groups by age and education, the differences between estimates across methods are even more pronounced, and QMLE provides new insights into heterogeneity across households compared to the original study. Monte Carlo experiments using non-normal shocks suggest that consumption insurance estimates for the model are more accurate for QMLE than GMM, including when correcting for bias and especially given a smaller sample such as is only available when looking at sub-groups. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27328 Likelihood-ratio-based confidence sets for the timing of structural breaks Eo, Yunjong; Morley, James We propose the use of likelihood-ratio-based confidence sets for the timing of structural breaks in parameters from time series regression models. The confidence sets are valid for the broad setting of a system of multivariate linear regression equations under fairly general assumptions about the error and regressors, and allowing for multiple breaks in mean and variance parameters. In our asymptotic analysis, we determine the critical values for a likelihood ratio test of a break date and the expected length of a confidence set constructed by inverting the likelihood ratio test. Notably, the likelihood-ratio-based confidence sets are more precise than other confidence sets considered in the literature. Monte Carlo analysis confirms their greater precision in finite samples, including in terms of maintaining accurate coverage even when the sample size or magnitude of a break is small. An application to postwar U.S. real gross domestic product and consumption leads to a shorter 95% confidence set for the timing of the “Great Moderation” in the mid-1980s than previously found in the literature. Furthermore, when taking co-integration between output and consumption into account, confidence sets for structural break dates become even shorter and suggest a “productivity growth slowdown” in the early 1970s and an additional large, abrupt decline in long-run growth in the mid-1990s. 2015-01-01T00:00:00Z https://hdl.handle.net/2123/27324 Nowcasting the output gap Berger, Tino; Morley, James; Wong, Benjamin We propose a way to directly nowcast the output gap using the Beveridge–Nelson decomposition based on a mixed-frequency Bayesian VAR. The mixed-frequency approach produces similar but more timely estimates of the U.S. output gap compared to those based on a quarterly model, the CBO measure of potential, or the HP filter. We find that within-quarter nowcasts for the output gap are more reliable than for output growth, with monthly indicators for a credit risk spread, consumer sentiment, and the unemployment rate providing particularly useful new information about the final estimate of the output gap. An out-of-sample analysis of the COVID-19 crisis anticipates the exceptionally large negative output gap of -8.3% in 2020Q2 before the release of real GDP data for the quarter, with both conditional and scenario nowcasts tracking a dramatic decline in the output gap given the April data. 2020-01-01T00:00:00Z https://hdl.handle.net/2123/27323 Why Has the U.S. Economy Stagnated Since the Great Recession? Eo, Yunjong; Morley, James Since the Great Recession in 2007–2009, U.S. real GDP has failed to return to its previously projected path, a phenomenon widely associated with secular stagnation. We investigate whether this stagnation was due to hysteresis effects from the Great Recession, a persistent negative output gap following the recession, or slower trend growth for other reasons. To do so, we develop a new Markov-switching time series model of output growth that accommodates two different types of recessions: those that permanently alter the level of real GDP and those with only temporary effects. We also account for structural change in trend growth. Estimates from our model suggest that the Great Recession generated a large, persistent negative output gap rather than any substantial hysteresis effects, with the economy eventually recovering to a lower trend path that appears to be due to a reduction in productivity growth that began prior to the onset of the Great Recession. 2022-01-01T00:00:00Z https://hdl.handle.net/2123/27322 Estimating and accounting for the output gap with large Bayesian vector autoregressions Morley, James; Wong, Benjamin We consider how to estimate the trend and cycle of a time series, such as real gross domestic product, given a large information set. Our approach makes use of the Beveridge–Nelson decomposition based on a vector autoregression, but with two practical considerations. First, we show how to determine which conditioning variables span the relevant information by directly accounting for the Beveridge–Nelson trend and cycle in terms of contributions from different forecast errors. Second, we employ Bayesian shrinkage to avoid overfitting in finite samples when estimating models that are large enough to include many possible sources of information. An empirical application with up to 138 variables covering various aspects of the US economy reveals that the unemployment rate, inflation, and, to a lesser extent, housing starts, aggregate consumption, stock prices, real money balances, and the federal funds rate contain relevant information beyond that in output growth for estimating the output gap, with estimates largely robust to substituting some of these variables or incorporating additional variables. 2020-01-01T00:00:00Z https://hdl.handle.net/2123/27080 The Australian Twins Economic Preferences Survey Kettlewell, Nathan; Tymula, Agnieszka This paper describes the Australian Twins Economic Preferences Survey (ATEPS). The dataset comprises a wide variety of preference and behavioral measures (risk aversion, impatience, ambiguity aversion, trust, confidence) elicited using incentivised decision tasks. 1,120 Australian adult twins (560 pairs) completed the survey, making it one of the largest datasets containing incentivised preference measures of twins. As the survey was conducted during the COVID-19 pandemic, we also collected information on experiences related to the pandemic, along with a variety of questions on political attitudes and mental wellbeing. We hope that ATEPS can make a valuable contribution to social science and genetics research. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27081 The Australian Twins Economic Preferences Survey Kettlewell, Nathan; Tymula, Agnieszka This paper describes the Australian Twins Economic Preferences Survey (ATEPS). The dataset comprises a wide variety of preference and behavioral measures (risk aversion, impatience, ambiguity aversion, trust, confidence) elicited using incentivised decision tasks. 1,120 Australian adult twins (560 pairs) completed the survey, making it one of the largest datasets containing incentivised preference measures of twins. As the survey was conducted during the COVID-19 pandemic, we also collected information on experiences related to the pandemic, along with a variety of questions on political attitudes and mental wellbeing. We hope that ATEPS can make a valuable contribution to social science and genetics research. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27078 The Heritability of Trust and Trustworthiness Depends on the Measure of Trust Kettlewell, Nathan; Tymula, Agnieszka Using a large sample of 1,120 twins, we estimated the heritability of trust using four distinct measures of trust - domain-specific political trust, general self-reported trust, and incentivized behavioral trust and trustworthiness. Our results highlight the importance of measuring trust in a context because its heritability differs substantially across the four measures, from 0% to 37%. Moreover, we provide the first evidence on the heritability of political trust which we estimate to be 37%. Furthermore, like the heritability, the environmental correlates of trust also vary across the different measures with political trust having the largest set of environmental covariates. The perceptions of COVID-19 health and income risks are among the unique correlates of political trust, with participants who are more worried about financial and health consequences of COVID-19, trusting politicians less, stressing the importance of trust in political leaders during a health crisis. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/27077 The Heritability of Trust and Trustworthiness Depends on the Measure of Trust Kettlewell, Nathan; Tymula, Agnieszka Using a large sample of 1,120 twins, we estimated the heritability of trust using four distinct measures of trust - domain-specific political trust, general self-reported trust, and incentivized behavioral trust and trustworthiness. Our results highlight the importance of measuring trust in a context because its heritability differs substantially across the four measures, from 0% to 37%. Moreover, we provide the first evidence on the heritability of political trust which we estimate to be 37%. Furthermore, like the heritability, the environmental correlates of trust also vary across the different measures with political trust having the largest set of environmental covariates. The perceptions of COVID-19 health and income risks are among the unique correlates of political trust, with participants who are more worried about financial and health consequences of COVID-19, trusting politicians less, stressing the importance of trust in political leaders during a health crisis. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26587 Psychological, social and cognitive resources and the mental wellbeing of the poor Cobb-Clark, Deborah; Kettlewell, Nathan Our study takes advantage of unique data to quantify deficits in the psychosocial and cognitive resources of an extremely vulnerable subpopulation–those experiencing housing vulnerability–in an advanced, high-income country (Australia). Groups such as these are often impossible to study using nationally representative data sources because they make up a small share of the overall population. We show that those experiencing housing vulnerability sleep less well, have more limited cognitive functioning, and less social capital than do those in the general population. They are also less emotionally stable, less conscientious, more external, and more risk tolerant. Collectively, these deficits in psychosocial and cognitive resources account for between 24–42% of their reduced life satisfaction and their increased mental distress and loneliness. These traits also account for a large proportion of the gap in mental wellbeing across different levels of housing vulnerability. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26555 Debt and financial market contagion Hsiao, Cody Yu-Ling; Morley, James We empirically investigate why financial crises spread from one country to another. For our analysis, we develop a new multiple-channel test of financial market contagion and construct indices of crisis severity in equity markets in order to examine how the transmission of shocks across countries can be related to direct linkages between countries or to common characteristics. Based on network analysis with our proposed multiple-channel test for crises between 2007 and 2021, we find that the Great Recession is the most pervasive across countries, followed by the European sovereign debt crisis and the recent COVID pandemic, with the subprime mortgage crisis being the least pervasive. Our main finding is that similar public, private and external debt characteristics are particularly helpful in explaining the transmission of financial shocks during crises. Fiscal deficits appear more important than current account deficits, while stage of economic development matters more than regional linkages, but none of these indicators is as important as debt. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26549 Age, Industry, and Unemployment Risk During a Pandemic Lockdown Graham, James; Ozbilgin, Murat This paper models the macroeconomic and distributional consequences of lockdown shocks during the COVID-19 pandemic. The model features heterogeneous life-cycle households, labor market search and matching frictions, and multiple industries of employment. We calibrate the model to data from New Zealand, where the health effects of the pandemic were especially mild. In this context, we model lockdowns as supply shocks, ignoring the demand shocks associated with health concerns about the virus. We then study the impact of a large-scale wage subsidy scheme implemented during the lockdown. The policy prevents job losses equivalent to 6.5% of steady state employment. Moreover, we find significant heterogeneity in its impact. The subsidy saves 17.2% of jobs for workers under the age of 30, but just 2.6% of jobs for those over 50. Nevertheless, our welfare analysis of fiscal alternatives shows that the young prefer increases in unemployment transfers as this enables greater consumption smoothing across employment states. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26525 COVID-19, social isolation and the mental health of autistic people and their families: A qualitative study. Pellicano, Elizabeth; Brett, Simon; den Houting, Jacquiline; Heyworth, Melanie; Magiati, Iliana; Steward, Robyn; Urbanowicz, Anna; Stears, Marc LAY ABSTRACT: In this study, we show that autistic people and their families have found it very difficult to deal with the lockdowns during the COVID-19 pandemic. Autistic and non-autistic researchers spoke to 144 people, including 44 autistic adults, 84 parents of autistic children and 16 autistic young people (12-18_years old). We asked them about their everyday lives and mental health during lockdown. People told us that they enjoyed having fewer obligations and demands compared to pre-COVID-19 life. They felt that life was quieter and calmer. But people also told us again and again how much they missed meeting people in real life, especially their friends, and their therapists and support workers. People told us that their mental health suffered because they did not have contact with their friends and services. Importantly, many people (including researchers) think that autistic people do not want friends or to be around people. But our results show that is not true. Many autistic people do want friends and to be around other people. Some people's mental health has been damaged by not being able to see people during COVID-19. Autistic people need support in many areas of life so they can keep socialising and seeing their friends even through difficult times, like pandemics. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26415 An Experimental Comparison of Risky and Riskless Choice—Limitations of Prospect Theory and Expected Utility Theory Chung, Hui-Kuan; Glimcher, Paul; Tymula, Agnieszka Prospect theory, used descriptively for decisions under both risk and certainty, presumes concave utility over gains and convex utility over losses; a pattern widely seen in lottery tasks. Although such discontinuous gain-loss reference-dependence is also used to model riskless choices, only limited empirical evidence supports this use. In incentive-compatible experiments, we find that gain-loss reflection effects are not observed under riskless choice as predicted by prospect theory, even while in the same subjects gain-loss reflection effects are observed under risk. Our empirical results challenge the application of choice models across both risky and riskless domains. 2019-01-01T00:00:00Z https://hdl.handle.net/2123/26414 Altruism among Consumers as Donors Heger, Stephanie A.; Slonim, Robert; Tausch, Franziska; Tymula, Agnieszka Like most charitable and non-profit organizations, the arts, cultural institutions and universities often ask individuals for financial gifts to help fund their operations. However, a key difference is that the individuals who are solicited for charitable donations by arts and cultural institutions are oftentimes also purchasing services from the same institution. Thus, an open question is whether, and how, individuals make trade-offs between charitable gifts and consumer purchases from the same institution. We investigate this question in an online experiment that asks Sydneysiders to make a series of decisions between donating to the iconic Sydney Opera House, purchasing merchandise from the Sydney Opera House and keeping money. Our findings show that demand for SOH merchandise and SOH donations are substitutes. Further, we find evidence that increasing the individuals’ awareness of the substitutability between money received from donations and money received from the sale of merchandise, increases the cross-price elasticity. This is particularly true for those individuals who positively identify with the Opera House. Our results suggest that the unique nature of arts, cultural and educational institutions as recipients of donations and providers of services mean that fundraising among “patrons” may crowd-in additional revenue. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26404 Loss aversion and competition in Vickrey auctions: Money ain't no good Rosato, Antonio; Tymula, Agnieszka A key prediction of expectations-based reference-dependent preferences and loss aversion in second-price auctions with private values is that the number of bidders should affect bids in auctions for real objects but not in auctions with induced monetary values. In order to test this distinctive comparative statics prediction, we develop an experiment where subjects bid in multiple auctions for real objects as well as auctions with induced values, each time facing a different number of rivals. Our results are broadly consistent with expectations-based reference-dependent preferences and loss aversion. We find that in real-object auctions bids decline with the intensity of competition whereas in induced-value auctions, instead, bids do not vary with the intensity of competition. Our results suggest that bidders may behave differently in real-object auctions than in induced-value ones, casting some doubt on the extent to which findings from induced-value laboratory experiments can be transferred to the field. 2019-01-01T00:00:00Z https://hdl.handle.net/2123/26370 Waterfall illusion in risky choice – exposure to outcome-irrelevant gambles affects subsequent valuation of risky gambles Guo, Julie; Tymula, Agnieszka Based on recent discoveries in economics, neuroscience, and psychology, we hypothesize that pure exposure to high-payoff or low-payoff gambles can change people's subsequent reported valuations of gambles and confirm this hypothesis in a laboratory experiment. In particular, the same participants within the same experimental session provide higher valuations for the same gambles after they have been exposed to low-payoff gambles compared to after they have been exposed to high-payoff gambles. These results are consistent with the current understanding of how the nervous system encodes payoffs and imply that even brief experiences that do not change wealth can impact an individual's reported valuations of risky options. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/26207 Divorce early or divorce late? The long-term financial consequences. Fisher, Hayley; Low, Hamish We use data from the UK Household Longitudinal Study (Understanding Society) to examine income, housing and wealth for those who divorce in England and Wales. We consider variation between different generations and examine how circumstances at divorce, the year of divorce, and re-partnering behaviour post-divorce affect our results. We find that women in all cohorts have lower household income if divorced, but that men’s household income does not suffer. Men and women in all cohorts have lower housing wealth if they have divorced. Remarriage is an important pathway for recovery. 2018-01-01T00:00:00Z https://hdl.handle.net/2123/25643 Implications of state-dependent pricing for DSGE model-based policy analysis in Indonesia Lie, Denny This paper builds a small open economy dynamic stochastic general equilibrium (DSGE) model for Indonesia with state-dependent pricing (SDP) and studies its implications for policy analysis. Variations in the extensive margin of price adjustment under SDP are shown to non-trivially affect the model-generated variance decompositions and impulse responses to various shocks. DSGE model-based policy analyses conducted without this extensive margin feature might therefore lead to inaccurate policy prescriptions. In particular, the SDP model would call for a greater degree of monetary easing in response to the COVID-19 pandemic, than that prescribed by the standard time-dependent pricing (TDP) model. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/25479 Increased risk-taking, not loss tolerance, drives adolescents’ propensity to choose risky prospects more often under peer observation Tymula, Agnieszka; Wang, Xueting Relative to adults, adolescents make more welfare-decreasing decisions, especially in the presence of peers. The consequences of these decisions result in substantial individual and societal losses in terms of lives lost, injury, hospitalization costs, and foregone opportunities. In this paper, we use laboratory within-subject and between-subject experiments with younger (12–17 years old) and older (18–24 years old) adolescents to identify which economic preference is affected by peer observation in adolescence — risk tolerance in gains, risk tolerance in losses, and/or loss aversion. We find that in our study, while observed by peers, 18–24-year-old adolescents became more risk-tolerant both in gains and in losses but more loss averse. We discuss the potential mechanisms driving the result and its policy implications. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/24846 Age, Industry, and Unemployment Risk During a Pandemic Lockdown Graham, James; Ozbilgin, Murat This paper models the macroeconomic and distributional consequences of lockdown shocks during the COVID-19 pandemic. The model features heterogeneous life-cycle households, labor search, employment risk, and multiple industries. We present an application to New Zealand, where the health effects of the pandemic were especially mild relative to other countries. This allows us to study the effects of lockdowns absent demand shocks induced by health concerns about the virus itself. We use model counterfactuals to study the impact of a large wage subsidy scheme implemented in New Zealand. We find that the subsidy prevented a large number of job losses, saving around 6.8\% of steady state employment. We then study the welfare consequences of several alternative fiscal interventions during the pandemic. While the wage subsidy prevents much unemployment among young households, we find that they enjoy larger welfare gains from a policy that raises unemployment benefits during the pandemic. 2021-01-01T00:00:00Z https://hdl.handle.net/2123/9993 A classification of bargaining solutions by evolutionary origin Hwang, Sung-Ha; Newton, Jonathan For games of contracting under perturbed best response dynamics, varying the perturbations along two dimensions (uniform vs. logit, directed vs. undirected) gives four possibilities. Three of these select differing major bargaining solutions as stochastically stable. The fourth possibility yields a new bargaining solution which exhibits significant nonmonotonicities and demonstrates the interplay of two key drivers of evolutionary selection: (i) the ease of making errors; (ii) the ease of responding to errors. 2014-01-01T00:00:00Z https://hdl.handle.net/2123/9951 Monkey see, monkey do: truth-telling in matching algorithms and the manipulation of others Guillén, Pablo; Hakimov, Rustamdjan We test the effect of the amount of information on the strategies played by others in the theoretically strategy-proof Top Trading Cycles (TTC) mechanism. We find that providing limited information on the strategies played by others has a negative and significant effect in truth-telling rates. Subjects report truthfully more often when either full information or no information on the strategies played by others is available. Our results have potentially important implications for the design of markets based on strategy-proof matching algorithms. 2014-01-01T00:00:00Z https://hdl.handle.net/2123/9732 Flexible valuations for consumer goods as measured by the Becker-DeGroot-Marschak mechanism Tymula, Agnieszka; Woelbert, Eva; Glimcher, Paul Economists have long been interested in mechanisms that lead to truthful revelation of the relative values individuals place on diff erent goods. In this paper we take one of the most popular of such mechanisms, and show that valuations obtained using the Becker-DeGroot-Marschak (BDM) procedure depend on the distribution of prices presented to subjects when the mechanism is implemented. We show that this eff ect of price distribution occurs quite frequently, significantly impacts reported valuations, and that it is unlikely to be caused by misconceptions about BDM. This eff ect is the largest when pricing distributions show a large peak just above or just below an individual's average valuation of the good being considered. We also show that a simple non-incentive compatible subject rating of the desirability of goods can be used to predict the likelihood that pricing distributions will influence BDM valuations. Valuations for goods subjects report that they most want to purchase are most likely to be influenced by distributional structure. Our results challenge some of the dominant theoretical models of how BDM-like valuation procedures relate to standard notions of utility. 2013-11-01T00:00:00Z