Martin O'Brien

Financial crises and international stock market volatility transmission

This paper examines the interplay between stock market returns and their volatility, focusing on the Asian and global financial crises of 1997–98 and 2008–09 for Australia, Singapore, the UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992–June 2009). Based on the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time-varying co-volatility among these markets indicates that investors will be highly unlikely to benefit from diversifying their financial portfolio by acquiring stocks within these four countries only.

The Australian Labour Market in 2007

Both global and domestic economic growth remained robust in 2007 resulting in historically low unemployment and high labour force participation in Australia. However, these favourable labour force statistics were overshadowed for much of the year by a number of other issues such as the continuing drought, high oil and petrol prices and associated inflation and interest rate pressures, a November federal election, and the first full year of the operation of the Work Choices legislation. This article will address each of these issues by presenting an analysis of the macroeconomy and labour market, and reviewing the labour market implications of the Work Choices legislation in Australia.

The Australian Labour Market in 2003

The labour market remained strong throughout 2003 with ongoing jobs growth and a continuation of the trend towards a lower unemployment rate. Unlike previous years, in 2003, additional jobs were mainly full-time jobs and the female labour force participation rate declined. After 11 years of ongoing improvement in the condition of the labour market, this boom is lacking the three developments associated with past improvement in the labour market: strong wages growth, strong growth in labour force participation rates, and increased industrial disputation. The review also considers the ongoing growth in the employment services sector associated with the spread of temporary agency employment. The topical issue of the ageing of the population is then considered with a critical examination of the current policy direction of extending the working life of Australian workers. Finally, a related issue is reviewed: the provision of child care services in Australia.

Examining the nature of the relationship between Tapis crude oil and Singapore petrol prices

Fuel prices play a crucial role in the supply side of many economies across the globe. Hence, it is important to ensure that fuel pricing is efficient and free from any asymmetric behaviour. This paper examines the long- and short-run relationships between the price of unleaded petrol in Singapore (Mogas95) and the price of Tapis crude oil using 4,929 daily observations (4 June 1993-25 April 2012). As expected, we found that these two key energy indicators are cointegrated. We then developed a modelling framework that allowed us to test for adjustment asymmetries that distinguish between the size and sign of disequilibria, proxied by three different error correction terms. We found no significant evidence of any asymmetric pricing behaviour and market inefficiency. However, our results revealed a significant weekly cyclical pattern, with petrol being more expensive on Thursdays/Fridays than the rest of the week.

The Australian Labour Market in 2006

2006 generally represented a solid year in terms of macroeconomic performance and labour market indicators, even under the threat of increasing inflation and interest rates. However, some favourable aggregate labour market indicators disguised major disparities at disaggregated regional, sectoral or demographic levels. The major development in the labour market was the implementation and operation of the Work Choices legislation, which will shape the industrial relations landscape in Australia for many years to come. This article presents an analysis of the performance of the macroeconomy and labour market, and reviews the developments of the Work Choices legislation.

The Australian Labour Market in 2005

2005 represented another good year in terms of labour market performance. In this context it is difficult to justify WorkChoices on the basis that it will improve economic performance. This article undertakes an analysis of the justification for and the likely impact of WorkChoices on the labour market.

Does the interest rate for business loans respond asymmetrically to changes in the cash rate

This article examines the dynamic relationship between the Reserve Bank of Australias (RBAs) cash rate and the variable interest rate for lending to small businesses. The relationship is evaluated via an asymmetric GARCH model using monthly data spanning from August 1990 to October 2012. Our results show that a 1 percentage point increase in the cash rate results in an instantaneous 1.086 percentage point rise in the variable rate for small businesses, whereas an equivalent 1 percentage point cut only leads to a 0.862 percentage point fall with a delay of up to 2 months. This outcome has obvious implications for the RBAs monetary policy transmission mechanism and the effectiveness of the expansionary policy versus contractionary policy.

The Short Run Impact of Penalty Rate Cuts on Employment Outcomes in Retail and Hospitality Sectors in Australia

The issue of weekend penalty rates has been a contentious political issue in recent times. In its recent review of Modern Awards, the Fair Work Commission determined a reduction in Sunday penalty rates, arguing that this would result in increased employment and hours in Retail and Hospitality sectors. In this paper, we present a critique of the evidence before the Commission relating to employment creation. We also present survey findings of workers’ employment before and after the penalty rate reform. In the short run we find that there was no discernible positive impact on affected workers’ employment outcomes.

Do Students Benefit From Supplemental Instruction

Peer assisted study sessions (PASS) are a type of supplemental instruction (SI) that provide students with out-of-class study review sessions with a group of peers. A student, who has successfully completed the subject and acts as a mentor, facilitates the voluntary sessions. Results of the PASS program at the University of Wollongong have been quite positive in that students, on average, who attend more PASS, achieve higher marks. However, a simple comparison does not control for self-selection bias. We control for self-selection in two ways. Firstly, we use Heckmans two-stage correction technique to analyze the 2002 cohort. Secondly, students in the 2003 cohort were randomly allocated into three groups of equal size: - A control group that was allocated to normal tutorials with standard class sizes and ineligible to attend PASS - A group that was eligible to attend PASS and had normal tutorials of standard sizes - A group that was ineligible to attend PASS but allocated to normal tutorials with smaller class sizes. The results of both methods are consistent and indicate the PASS program has a positive impact on the academic performance of students after correcting for selection bias.