Oil and Iron Ore Price Shocks: What are the Different Economic Effects in Australia?
This paper compares the macroeconomic effects of global oil and iron ore price shocks on the Australian economy. Using a Bayesian structural vector autoregression model with sign restrictions, we identify three types of shock: supply, demand and specific demand. The main results suggest that, over the period from 1990Q1 to 2014Q4, the oil shock had a relative larger impact than the iron ore shock on output and in flation, while the iron ore shock was the dominant source of interest and exchange rate movements. The effects crucially depend on the underlying sources of oil or iron ore price shifts. As Australia is a small open economy, oil and iron ore prices should be treated as exogenous factors. Real GDP responds negatively to a rise in oil prices driven by supply disruptions, but positively to a similar shock on the iron ore market. Higher global demand for these commodities has a positive impact on the economy, but the iron ore demand shock is about twice larger. However, a positive oil and iron ore price shock driven by specific demand lead to a temporary decline in real GDP.
Farm Contracts and Biosecurity: The case of Broiler Farmers in Bali, Indonesia
The present study aims to first to investigate the factors influencing farmers' selection of contract companies and second to identify a bonus system that best reward farmers for biosecurity adoption. The study employed two approaches in the analysis to achieve the research objectives. First, an econometrics approach of three logit models was developed to examine the factors influencing famers' selection of contractor company. Second, the gross margin approach considering two main price conditions, namely generic and actual price schemes to evaluate the bonus system that best reward biosecurity implementation. The data used was cross-sectional data from 100 farmer respondents. Result of the study shows that there are six factors affecting farmers' choice of contractor company. These include farmer experience in chicken rearing, main occupation, farm size, company size, contract price and number of bonuses offered by the company. With regard to the gross margin analysis, this research presents that big companies do not necessarily provide better support for biosecurity implementation than smaller companies. The amount of bonus reward in the system together with the type of bonuses is important for consideration. Contract 6 with three types of bonuses best reward farmers for biosecurity adoption, under the generic price assumptions. While Contract 5 with four types of bonuses provided the best reward system under the actual price condition. Findings from this research are informative to both government and contractor companies in considering supports for biosecurity implementation. Although the analysis is limited to one production year, the study opens to future research on the evaluation of long term biosecurity benefits.
The Determinants of the Japanese Real Imports from Australian Exports
The bilateral trade between Australia and Japan has played very important roles in Australian and Japanese economies over a long period of time. In this study, we apply the bounds testing approach within an Autoregressive Distributed Lag framework (ARDL) to evaluate the major determinants of Japanese demand for Australian exports. The modelling results show that real Gross Domestic Product (GDP) is the most important factor positively affecting the Japanese real imports from Australia. The real exchange rate and foreign reserves assets affect negatively but are inelastic in both the long run and the short run. With a value of -0.74, the error correction coefficient is very significant. This indicates that only a short period of time (4 months) is needed to achieve long run equilibrium.
Exchange Rate Volatility and its Impact on Trade Performance in Australia: Empirical Evidence from Aggregate, Sectoral and Bilateral Trade Data Levels
As an important macro variable, the exchange rate has a significant influence on the whole economy. This study focuses on the impact of exchange rate volatility on trade performance in Australia given the evidence from the Autoregressive Distributed Lag (ARDL) bounds testing approach at aggregate, sectoral and bilateral trade data levels. Despite the considerable amount of research that has been undertaken to analyse the impact of exchange rate volatility on trade performance, studies of the impact of exchange rate volatility on trade performance have reported many conflicting results since the results are significantly influenced both by the authors' modelling strategies, for example, the choices of sampling period, model specification, measurements of exchange rate volatility and countries considered, and by the contexts of their investigations. Some studies demonstrate that there are negative relationships between exchange rate volatility and trade performance whereas other studies show positive relationships. Some empirical literature suggests that exchange rate volatilities may have both positive and negative impacts on trade flows, while other studies show that there is no significant relationship between exchange rate volatility and trade flows. This study intends to explore new and previously unused quarterly data ranging from 1983 to 2007 and apply the ARDL bounds testing approach to estimate the effects of exchange rate volatility on Australia’s trade performance. This study makes a contribution to current research in various ways. First, this study develops two sets of nominal and real exchange rate volatility, applying the most commonly used measurements generated from moving average standard deviation (MSD) and the GARCH models for each nominal and real exchange rate. Secondly, it is based on a substantially longer period of quarterly data than previous studies. In addition, this study empirically investigates the impact of exchange rate volatility on the export and import flows of Australia from aggregate, sectoral and bilateral trade data levels, which can deal with the aggregation bias and deepen the analysis step by step and ensure the results are more reliable and robust.
Exchange rate volatility and its effects on trade performance in Vietnam: Empirical evidence from aggregate, bilateral and sectoral trade data levels
The main purpose of this thesis is to examine five research questions with respect to what extent exchange rate volatility affects Vietnamese international trade performance through applying dynamic panel models with data from 2000 to 2012. These research questions include: 1. What effects does exchange rate volatility have on Vietnam's international trade flows? 2. Are the effects equal or different between aggregate, bilateral, and sectoral data? 3. Why use the generalised method of moments (GMM) to analyse the impact of exchange rate changes on the trade performance of Vietnam? Is it appropriate? 4. Whether or not a different method of volatility measurements reveals a different trade effect? 5. What measures do governmental policy makers in Vietnam need to implement so as to develop suitable exchange rate policies in order to encourage international trade of this country? The thesis is divided into eight chapters. Chapter 1 introduces background information, research problem, expected contributions, research objectives and outline of the thesis. Chapter 2 presents Vietnamese exchange rate policy and statistically analysis of merchandise trade of this country. Chapter 3 provides literature reviews of previous studies on the effects of exchange rate instability on trade, focusing on measures of exchange rate variations, methods and techniques of estimations and results. Chapter 4 is an exploration of methodology using an empirical research model, including a formulation of the equations which make up the econometric model. The next three chapters present empirical results of the impacts of exchange rate volatility on Vietnamese trade performance at three different data levels, in each chapter there is a brief description of variables, data and model specification. Chapter 5 reports the empirical results of the effects of exchange rate instability on the trade of 53 countries including Vietnam, at the aggregate trade data level. Chapter 6 discusses the empirical results of the impact of exchange rate volatility on Vietnamese trade at the bilateral trade data level. Chapter 7 presents this empirical result at the sectoral level. Chapter 8 deals with a summary and conclusion of the study, as well as its limitations and suggestions for further research directions. The main findings, based on the empirical study undertaken to examine the impacts of exchange rate volatility on trade performance of Vietnam at three data levels, are now summarised. In total, there were 32 equations estimated. Firstly, exchange rate volatility has statistically significant impacts on Vietnam’s trade performance in the majority of the 32 trade equations. Secondly, the impact of exchange rate volatility on trade differs between different trade data levels. While exchange rate instability has mostly significant positive impacts on exports in the aggregate level, its effects are mostly significant and negative in the bilateral and sectoral level. Further, a volatile exchange rate has no significant impact on imports at the aggregate level; its effects are significant and positive in most import equations at bilateral and sectoral level. Thirdly, exchange rate volatility can have either a positive or negative impact on trade performance. For aggregate, bilateral and sectoral levels, volatility has a statistically significant positive impact on trade flows in 3, 1 and 8 equations respectively, and a statistically significant negative effect in 0, 2 and 5 equations respectively. Fourthly, for all the equations analysed there are more export equations than import equations (12 vs 7) in which exchange rate volatility has a statistically significant impact on trade flows. This suggests that Vietnam's exports are more sensitive than imports to exchange rate volatility. In the majority of estimated equations, exchange rate volatility has a statistically significant negative effect on exports, while its impact on imports is statistically significant and positive. Fifthly, generally there is a large overall difference between the results produced with MOVSD-derived volatility measures and those with GARCH-derived volatility measures. Specifically, in terms of the number of equations in which volatility has a statistically significant impact on trade flows, these numbers (using MOVSD-derived measures vs GARCH-derived measures) are 2 vs 1, another 2 vs 1, and 9 vs 4 for aggregate, bilateral and sectoral levels respectively. The findings in this thesis make a strong case for more careful macroeconomic management, in order to boost Vietnam's overall trade and economic growth strategy, particularly in the light of Vietnam’s many years of persistent trade deficit. In practice, macroeconomic policies that enhance exports and limit imports should be implemented. In general, policy makers should develop policies, under which greater stability of exchange rate of VND will be maintained, in order to improve the country’s trade balance.
The Effects of Fiscal and Monetary Policies on Aggregate Demand (Output) in Selected Asian Economies: A VAR and Panel VAR Approach
This thesis investigates the effects of fiscal and monetary policies on aggregate demand (output) in selected Asian countries. These countries have been classified into three groups. The first group comprises five SAARC economies: Bangladesh, India, Nepal, Pakistan and Sri Lanka. The second group consists of the ASEAN-5: Indonesia, Malaysia, the Philippines, Singapore and Thailand. The last group is made up of two countries: Hong Kong and Republic of Korea (hereafter Korea). The choice of these twelve countries was determined by three reasons. First, they have large populations, large resource bases, and large markets. They are also among the emerging economies in the world. Second, they are located close by in the same region. They are also integrated by trade and monetary unions. Finally, they have similar socio-economic characteristics. The time period 1974-2007 was chosen because, throughout this period, most Asian countries implemented structural reforms. ... The present thesis deals with the following research issues for each selected Asian economy. First, the influence of fiscal and monetary policies on aggregate demand (output) will be examined. Second, the relative strengths of various shocks at different time horizons will be determined. Third, the dynamic responses of output, money supply, government expenditure, the real exchange rate and the foreign interest rate to each type of internal and external shocks will be analysed. Finally, the relative effectiveness of fiscal policy and monetary policy on aggregate demand (output) for each country will be investigated. Throughout the thesis, both time series and panel data analyses techniques are utilized. In relation to the time series, specific techniques are applied to investigate the above issues. Using open IS-LM equations, the aggregate demand function is estimated as a function of real money supply, real government expenditure, the real exchange rate and the nominal foreign interest rate.