Discovery projects for funding commencing in 2013

Optimal taxation when the allocation of time matters

Dr M Racionero; Prof AL Booth; Em/Prof P Pestieau

Project Summary

This project aims to incorporate evidence-based models of time allocation, which go beyond the simple division between work and leisure, in optimal tax settings. This approach will help to inform the public policy debate on child support, by questioning whether, and if so how, to subsidise childcare, where parental time use plays a crucial role.

General market equilibrium analysis of securitisable assets in the presence of private information, when contracts are incomplete

Prof R Pitchford; Prof R Tourky

Project Summary

Three key markets (among others) were involved in the gestation of the worst financial crisis seen since the great depression: the market for mortgages and the market for securities, backed by mortgages and housing market. The focus of this project is to examine financial fragility in such markets, theoretically applying outcomes to Australian policy.

Time-consistent macroeconomic policy in nonlinear models

Prof R Dennis; Prof T Kirsanova

Project Summary

Efforts to use fiscal policy for macro-stabilisation have led to elevated debt levels and possible default in many countries. This project examines the appropriate design of fiscal policy and its implications for debt over the business cycle.

Discovery projects for funding commencing in 2012

A new approach to stability analysis for economic systems

Prof J Stachurski; Prof T Kamihigashi

Project Summary J Stachurski

This project will provide a new methodology for analysing stability in economic systems. By enhancing our understanding of stability and instability in markets for assets, credit, commodities and natural resources, this project will help economists forecast likely outcomes and improve the formulation of related economic policy.

Commodity cycles

A/Prof R Fry

Project Summary

The implications of resource demand by emerging markets are issues policy makers need to understand. This project address these by focusing on currency, equity and commodity linkages, the financial market and macroeconomic effects of currency collapse, and the role of emerging markets in mitigating/amplifying economic shock transmission.

Estimation of the continuous piecewise linear model and macroeconomic applications

Prof R Tourky; Dr RW Strachan; Dr F Carmignani

Project Summary RW Strachan

Relationships between economic variables are often characterised by non-linearities. This project develops a method to analyse a type of non-linearity that is frequently encountered in economics and uses this method to study four specific applications concerning the dynamics of inflation, growth, and the exchange rate.

Discovery projects for funding commencing prior to 2012

How do macroeconomic fluctuations affect the educational choices of young Australians? The 1990-1991 recession, recent evidence, and econometric issues

Dr JT Gorgens

Project Summary JT Gorgens

The educational choices of young people are crucial for any nation's future. The project's empirical findings will inform public policy, particularly in the areas of education and training and youth unemployment. The research will help policy makers target people who need extra support in tough times and help determine the demand for different kinds of education. The findings have implications for future policies aimed at reducing inequality. The project's methodological contributions will lead to better and more reliable research in economics and other fields such as biology and engineering. The findings will be suitable for the top economics journals and contribute to Australia's standing in the academic community.

The Role of the Family in Facilitating the Human Capital and Labour Market Investments of Young Australians

Prof D CobbClark; Dr CA Ryan; Dr JT Gorgens; Dr Y Tamura

Project Summary JT Gorgens

A nation's future lies in its young people, and society as a whole must take part in ensuring that today's youth acquire the skills, experience, and training necessary not only to cope, but to thrive. The proposed research will make a substantial step forward in understanding how families make decisions about supporting their young adult children and how those decisions are shaped by Australian social policy. The findings will inform social policy development by providing evidence on pressing issues such as the effects of rising house prices or weakening labour markets on young Australians' ability to invest in education.

Higher order moment contagion testing: implications of the US subprime mortgage crisis for Australia

Dr RA Fry; Prof VL Martin; Dr LC Tang

Project Summary

Even though crises are usually short lived, the long term implications of changes in asset values may be profound, particularly for superannuation assets. Implications of financial crises are also profound for institutions such as the RBA who change policy to achieve domestic objectives. The understanding of how internationally based financial crises affect Australia is important particularly when domestic inflationary pressures would appear to precipitate the need for the RBA to take the opposite policy stance to that prevalent of central banks internationally. This proposal highlights these relationships to provide insights into portfolio allocation decisions and provides information to facilitate well founded decisions by policy makers.

Climate Change Projections and Policy Design Under Uncertainty

Prof WJ McKibbin; Dr A Stegman

Project Summary WJ McKibbin

The issue of climate change and policy responses is one of the most important questions facing the world today. This research develops a global framework for understanding the many complexities surrounding this issue, for undertaking projections of emissions, for evaluating alternative policy proposals and for developing new policies. In particular it will provide a framework for undertaking alternative scenarios about future economic growth and carbon emissions and attempt to quantify uncertainties. It will also focus on major developing countries such as China and India which will be critical in the future evolution of world economic activity and greenhouse emissions.

An Economic Analysis of the Effect of Networks on Jobs and Mental Health in China: Patterns, Consequences and Policy Implications

Prof X Meng; Prof P Frijters; Prof RG Gregory; Prof C Dustmann; Dr F Cornaglia

Project Summary X Meng

China is a priority neighbour whose growth and stability will have a large impact on Australia. Urbanisation and economic reforms change the incentives to maintain and form social relations. Researching these changes to help policy makers keep the effects within acceptable borders is a top priority of the Chinese government and entirely in Australia's own interest. The project thus serves as a bridge between policymakers and researchers: it is done in consultation with AusAID, the Chinese ministry for labour, and international scientific organisations such as the Ford Foundation and the German Institute of Labour (IZA)

Economic Inequality: Trends, Causes and Consequences

A/Prof Andrew Leigh

Project Summary

Measuring inequality and understanding its determinants is important for three reasons. First, knowing the causes and consequences of inequality is critical to making trade-offs between equity and efficiency. Second, the degree of economic mobility over the lifecycle determines how much opportunity people have to move upwards, and how much risk they face on moving downwards. This informs policies that guard against risk (eg. social insurance) and those that encourage risk (eg. entrepreneurship). Third, by learning more about intergenerational mobility, we can improve policies that seek to boost the life chances of children in disadvantaged households.

Computing probabilities of theories where these probabilities vary over time with applications in macroeconomics

Dr RW Strachan; Prof GM Koop

Project Summary RW Strachan

This project will present a method to produce empirically based policy advice that accounts for the changing economic environment and that allows for a range of assumptions about how the economy works. The research and training will place Australia at the forefront of empirical macroeconomic research and strengthen international research networks. Policy making will be improved as: it will use information that is more robust to false assumptions; it will quickly incorporate new information; and we will understand better why certain policies did or did not work at different times in the past. The research will impact upon other sciences such as physics and engineering that use the same underlying tools far more than do economists.

Vector ARMA Models and Macroeconomic Modelling: Some New Methodology and Algorithms

Dr G Athanasopoulos; Prof DS Poskitt; Prof F Vahid; Dr TC Kam

Project Summary TC Kam

Economic variables are strongly related to each other, as well as being strongly related to their recent history. As a result, good dynamic multivariate models are crucial for effective policy making and forecasting in areas of vital national importance such as monetary and fiscal policy, environmental policy and tourism. Our project advances the frontiers of knowledge in multivariate time series modelling. The outcome of this project will be immediately useful for macroeconomic policy makers such as the Reserve Bank of Australia and the Treasury, and for industry bodies such as Tourism Australia

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