Graham M. Voss

Public and private investment in the United States and Canada

Abstract Using data for both the US and Canada, I examined private and public investment during the last four decades to determine what support there is, if any, for the crowding in hypothesis. Based on neo-classical theories of investment, simple VAR models of private and public investment behaviour are used to examine the short- and long-run interactions between these variables. For both countries there is no evidence of crowding in due to complementarities between public and private investment; in fact, innovations to public investment tend to crowd out private investment.

Public investment and economic growth

This article uses an extension of Mankiw, Romer and Weils augmented Solow-Swan growth model to examine whether public investment has a distinct role as a determinant of economic growth. It considers both the predictions of the model in steady state and in transition to steady state. For the steady state model, there is no significant effect from public investment on the level of output per worker. Using standard ordinary least squares (OLS) methods for the transition model, it observes a significant contribution to economic growth from public investment. When instrumental variables methods are used, however, the associated standard errors are much larger and the contribution of public investment is statistically insignificant.

Consumption and Wealth in Australia

This paper examines the relationship between consumption and wealth in Australia. We find a steady-state relationship between non-durables consumption, labour income and aggregate household wealth for the period 1988-1999. We also find that changes in both non-financial and financial assets have significant but different short-run and long-run effects in dynamic consumption models. Finally, we place our results within the broader empirical literature and examine whether they are consistent with standard theories of consumption. Copyright 2003. The Economic Society of Australia..

Is Public capital Provision Efficient

In this paper we provide a test of whether an optimal level of public investment has been undertaken in Australia over the last three decades The test is based on the intertemporal efficiency conditions for the standard optimal growth model with both private and public capital.

Consumption, external assets and the real interest rate☆

Abstract An intertemporal model is used to explain the long-run behavior of external assets. The model predicts that consumption, income and net external assets are cointegrated; a maximum likelihood procedure is used to test this hypothesis and to test linear restrictions implied by the model. Seven countries are considered with variable results. The model performs well for the United States and Germany, but yields improbable estimates of the real interest rate for the smaller economies considered. Adjustments for currency valuation effects improve the results for some of the small economies.

Monetary Integration, Uncertainty and the Role of Money Finance

This paper considers the positive theory of monetary integration in a general equilibrium monetary model. A role for money finance is presented which optimally reduces consumption variability when asset markets are incomplete. Importantly, this role is independent of the aggregate money stock and so does not restrict inflation policy.

The Term Structure of Interest Rates: Departures from Time-Separable Expected Utility

This paper assesses the ability of general-equilibrium models of asset pricing using two recently developed sets of preferences to account quantitatively for the observed variability in the Canadian term structure of interest rates. The preference structures are nonexpected utility and habit persistence associated with Epstein and Zin (1989) and Constantinides (1990), respectively. The framework adopted follows Backus, Gregory, and Zin (1989), where a numerical version of the theory is specified and empirical features of the artificial economy are compared with actual data. Neither preference structure is able to mimic satisfactorily the magnitude or the variability of the risk premiums.

Flexible Inflation Forecast Targeting: Evidence from Canada

We test whether the Bank of Canada pursues a flexible inflation forecast target, one that weights output growth as well as inflation. For the period 19962007, we find evidence that the Bank did effectively pursue such a target over the forecast horizon of 12 to 18 months. We find the relative weight that the Bank gives to output growth in its target to be positive and statistically significant within the range of 0.2 to 0.4.

Public Capital and Private Sector Productivity: A Review of the Empirical Evidence

This paper contains a survey of recent empirical research on the relationship between public capital and private sector production. The implications of these empirical studies for policy debates over the appropriate level of public capital are also examined.

What Do the RBA's Forecasts Imply About its Preferences Over Inflation and Output Volatility?

The Reserve Bank of Australia (RBA) has recently commenced publishing its forecasts of inflation and output growth in their quarterly Statement on Monetary Policy. As the RBA can potentially influence future outcomes for inflation and output through its choice of cash rate target, we examine whether the RBA’s forecasts reveal useful information about its tradeoff between inflation and output volatility. Our results suggest that the RBA targets a linear combination of deviations of inflation around target and output growth around potential growth – where the weight given to output growth deviations is about one‐third that given to inflation deviations. If we interpret this weight as the ratio of a central bank’s (relative) preference for output volatility and the slope parameter of the Phillips Curve; for typical values of the latter parameter we find the RBA – while not a strict inflation targeter – gives significantly less weight to minimising deviations in the output gap, than it does to minimising deviations of inflation around target.