The Teaching of First Year Economics in Australian Universities*

This paper surveys current pedagogical practice in the teaching of introductory macroeconomics and microeconomics in Australian universities. Survey results are presented detailing lecturers’ approaches to their teaching over 2001 and other aspects of their teaching environment. A comparison of the content and methodology of the main textbooks used in Australian introductory economic courses is also presented.

Skills Mismatch and Returns to Training in Australia:Some New Evidence

This paper utilises Australian data to evaluate the effect of firm-provided job training on labour income. It also examines whether training can shed light on the effects of skill-job mismatch. We employ the Heckman selection model to account for selection bias in training as well as work participation. The evidence shows that training has a significant positive impact on wages. Also, training ameliorates the disadvantage associated with the mismatch between formal education and required education. In addition, training is most valuable to the undereducated and young workers, and assists in the restoration and replenishment of human capitalTraining; Education; Overeducation; Undereducation; Earnings; Human capital depreciation

Enriching the Learning Experience: A CALM Approach.

This paper outlines and evaluates a new learning strategy implemented in the Faculty of Economics and Commerce at the University of Melbourne. The strategy is an Internet based assignment delivery and assessment system designed to (i) equip students to make link between macroeconomic theory and important real-world issues, (ii) develop positive attitudes to the subject (iii) develop deep approaches to learning (iv) develop a facility for critical analysis and problem solving and (v) develop effective study habits. Using a multi-dimensional evaluation strategy, the indications are that the new approach has succeeded in its aims.MACROECONOMICS ; TECHNOLOGY ; NETWORK ANALYSIS

An Examination of the Sustainability of Indian Fiscal Policy.

India has a long history of running fiscal deficits. This paper asks whether the magnitude of these deficits has involved a violation of India's intertemporal budget constraint. Times series evidence on Central government tax revenues and expenditures are examined for cointegration using procedures that are robust in the presence of structural change. We find no evidence of cointegration, a result that implies a violation of intertemporal solvency and that current fiscal policies are unlikely to be sustainable in the long-run.FISCAL POLICY ; DEBT ; ECONOMIC DEVELOPMENT

Equity Return and Short-Term Interest Rate Volatility: Level Effects and Asymmetric Dynamics

Evidence suggests that short-term interest rate volatility peaks with the level of short rates, while equity volatility responds asymmetrically to positive and negative shocks. We present an LM based test that distinguishes between level effects and asymmetry in volatility which is robust to the presence of unidentified nuisance parameters under the null. There is strong evidence of a level effect and asymmetric response in the relationship between S&P 500 Index returns and 3-month US Treasury Bills. The conditional covariance depends on the level of the short rate which has implications for hedging equity returns against short term interest rate movements.

Testing for Rate-Dependence and Asymmetry in Inflation Uncertainty: Evidence from the G7 Economies

The Friedman-Ball hypothesis implies a link between the inflation rate and inflation uncertainty. In this paper we employ a new test for the joint null hypothesis of no dependence effects and no asymmetry in the G7 inflation volatility. The results show that higher inflation rates operate additively via the conditional variance of inflation to induce greater inflation uncertainty in the U.S., U.K. and Canada. In addition, positive inflationary shocks are found to generate greater inflation uncertainty than negative shocks of a similar magnitude in the U.K. and Canada.

Rational Habit Modification: the Role of Credit.

This paper proposes an asymmetric model within which consumer credit facilitates both consumption smoothing and rational habit modification. The model provides a better description of aggregate time series consumption data than competeting models. In particular, the model can account for the various aggregate consumption anomalies that have led to repeated rejections of Hall's (1978) random walk model of consumption. The model is applied to US data using a GMM approach. The evidence suggests that new credit can predict short-run changes in consumption and has assisted consumers to become more forward-looking since 1975.CONSUMPTION ; CREDIT ; ESTIMATOR

Nowcasting, Business Cycle Dating and the Interpretation of New Information when Real Time Data are Available

A canonical model is described which reflects the real time informational context of decision-making. Comparisons are drawn with ‘conventional’ models that incorrectly omit market-informed insights on future macroeconomic conditions and inappropriately incorporate information that was not available at the time. It is argued that conventional models are misspecified and misinterpret news. However, neither diagnostic tests applied to the conventional models nor typical impulse response analysis will be able to expose these deficiencies clearly. This is demonstrated through an analysis of quarterly US data 1968q4-2006q1. However, estimated real time models considerably improve out-of- sample forecasting performance, provide more accurate ‘nowcasts’ of the current state of the macroeconomy and provide more timely indicators of the business cycle. The point is illustrated through an analysis of the US recessions of 1990q3—1991q2 and 2001q1— 2001q4.Structural Modelling; Real Time Data; Nowcasting; Business Cycles

The Effects of Uncertainty on Macroeconomic Performance: The Importance of the Conditional Covariance Model.

We study the effects of growth volatility and inflation volatility on average rates of output growth and inflation for postwar U.S. data in a multivariate asymmetric GARCH-M model. Our statistical model differs from other work in that we allow the conditional covariance of inflation and growth to be both nondiagonal and asymmetric. We show that the data reject diagonality and symmetry restrictions frequently imposed in the literature. Our results on the macroeconomic effects of uncertainty also differ from those in other recent studies using a more restrictive covariance model. Specifically, we find that increased growth uncertainty is associated with significantly higher average growth, and that higher inflation uncertainty is significantly negatively correlated with lower output growth and lower average inflation.Asymmetry; Multivariate GARCH-M; Inflation; Uncertainty; Growth

Economic Activity and the Stock Market: The Asymmetric Impact of Fundamental and Non-Fundamental News

In this paper, we present a general model of the joint data generating process underlying economic activity and stock market returns allowing for complex nonlinear feedbacks and interdependencies between the conditional means and conditional volatilities of the variables. We propose statistics that capture the long and short run responses of the system to the arrival of fundamental and non-fundamental news, conditioning on the sign and time of arrival of the news. The model is applied to US data. We find that there are significant differences between the short and long run responses of economic activity and stock returns to the arrival of news. Moreover, for certain classifications of news, the respective responses of economic activity and stock returns vary according to the nature of the news and the phase of the business cycle at which the news arrivesNonlinearity; Asymmetry; Stochastic Simulation; Business Cycle