Our article revisits the Okun relationship between observed unemployment rates and output gaps. We include in the relationship the effect of labour market institutions as well as age and gender effects. Our empirical analysis is based on 20 OECD countries over the period 1985-2013. We find that the share of temporary workers (which includes a high and rising share of young workers) played a crucial role in explaining changes in the Okun coefficient (the impact of the output gap on the unemployment rate) over time. The Okun coefficient is not only different for young, prime-age and older workers but also it decreases with age. From a policy perspective, it follows that an increase in economic growth will not only have the desired outcome of reducing the overall unemployment rate but it will also have the distributional effect of lowering youth unemployment. KEYWORDSOkun's law; unemployment; equilibrium unemployment rates JEL CASSIFICATION J64
This paper is concerned with the asymmetric adjustments between three Australian bank interest rates: a bank bill rate, a loan rate and a deposit rate. A multivariate asymmetric error-correction model is applied to capture the interplay of long-run relationships between the levels of the rates and short-run relationships between the changes in the rates. The empirical analysis, for the sample period 1990:012 000:04, shows that interest rate adjustments, in response to positive and negative shocks, are asymmetric in the short run, but not in the long run. In particular, the results suggest that banks adjust their loan and deposit rates, in response to a change in the bank-bill rate, at a faster rate during periods of monetary easings (negative changes) than during periods of monetary tightenings (positive changes). I IntroductionCentral banks in many countries now implement monetary policy by changing their o¤cial cash rate, thereby signalling the e¡ect of a tightening or a loosening of policy to the rest of the economy. While transmission mechanisms are still under study, one thing, at least is clearâ change in the o¤cial cash rate generates changes in the spectrum of interest rates from the money to the capital markets, including investment rates such as housing mortgage and business loan rates. For e¡ective monetary policy, it is necessary that the policy change be transmitted quickly to other rates, and that the new levels and spreads be of magnitudes that could cause changes in real expenditure. Thus knowledge about the sizes (that is, how much of the policy change in the o¤cial cash rate is passed on) as well as the speeds of transmission (that is, how quickly the policy change is passed on) is important for informed monetary policy.The transmission of the stance of monetary policy to lending rates is, for many countries, dominated by the behaviour of banks and hence an analysis of bank interest rate behaviour contributes to an understanding of the transmission process. There are two particular concerns: What are the fundamental relationships between bank rates and money-market rates? And what are the speeds of adjustments between these rates? More importantly, are the speeds and sizes of the adjustments asymmetric to a tightening and loosening of policy? And are these asymmetric e¡ects temporary or permanent? Understanding the nature of asymmetric behaviour is particularly important for informed monetary policy because it is useful to know the extent to which positive and negative policy shocks (in absolute terms) would generate di¡erent interest rate
This article summarises the academic contributions presented and discussed during the 2016 edition of the Melbourne Institute Macroeconomic Policy Meetings, which focused on the role played by uncertainty for a number of countries’ business cycle. Considerations on the interaction between uncertainty and financial frictions, the global dimension of uncertainty, uncertainty shocks in times of unconventional monetary policy and the imperfect knowledge that agents have over policy targets are among the discussions entertained in this article. The main insights coming from those papers are connected with the extant literature and directions for future research are offered.
SUMMARYA general parametric framework based on the generalized Student t-distribution is developed for pricing S&P500 options. Higher order moments in stock returns as well as time-varying volatility are priced. An important computational advantage of the proposed framework over Monte Carlo-based pricing methods is that options can be priced using one-dimensional quadrature integration. The empirical application is based on S&P500 options traded on select days in April 1995, a total sample of over 100,000 observations. A range of performance criteria are used to evaluate the proposed model, as well as a number of alternative models. The empirical results show that pricing higher order moments and time-varying volatility yields improvements in the pricing of options, as well as correcting the volatility skew associated with the Black-Scholes model.
This article summarises developments in the Australian economy in 2020. It describes the economic growth and labour market ramifications associated with COVID‐19, and the fiscal and monetary policies implemented to help counter its effects. COVID‐19 has resulted in considerable slack in an economy that was weak pre‐pandemic. While current policies are appropriately focused on stimulating demand and supporting employment, existing challenges such as weak growth in productivity, gross domestic product and real wages are also likely to remain relevant post‐pandemic.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.