The specification and estimation of Engle curves has drawn much attention over many years since the earliest attempt of Working (1943). Among the many approaches, a complete system of Engel curves stood out as more appealing as it explicitly imposes the important budget constraint in the allocation of family budgets. Further, extended researches were undertaken on nonlinear specifications as they are likely to produce results that are closer to the reality than the linear systems. Beneito (2003) attempted Box-Cox form of nonlinear specification but ended up estimating a set of linear equations using seemingly unrelated regression equations method. The present research extends the previous work on Engle curves in two ways; first by incorporating key demographic characteristics into the determination of expenditures in the specification of the Box-Cox form of nonlinear system, and second by using primary micro data from large household surveys to estimate the system by nonlinear estimation methods. Our estimations have produced robust results; the expenditure patterns are significantly nonlinear and the expenditure patterns are significantly different for different demographic groups.

Accurate forecasting of future exchange rates are of vital importance for firms and portfolio managers in the management of risk in international transactions. These enterprises frequently resort to the forecasts of market analysts as a viable source. In the meantime, market analysts' forecasts of the Australian dollar seem to be driven by over-optimism bias similar to that found by Mande et al. (2003) with respect to US and Japanese earnings forecasts. An examination of analysts' short-term forecasts of the Australian dollar reveals that they are subject to substantial over-optimism bias. The present research is an attempt to establish such empirical evidence of over-optimism bias in the context of Australian dollar forecasts. The findings of the research will be useful to business and government in the management of international transactions.

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