Otto’s Web Page
School of Economics
University of New South Wales
website contains my publications, current research papers, relevant programs
Policy Targeting Rules
Flexible Inflation Targeting:
Evidence for Canada (with Graham Voss), October 2011. We examine models of
flexible inflation targeting. The target criteria from these models restrict
the conditionally expected paths of inflation and output targeted by the
central bank. We estimate and test these rules using monthly data for Canada –
an early adopter of inflation targeting. It appears that the Bank of Canada
balances inflation and resource utilization over the medium term policy horizon
in a manner that is consistent with flexible inflation targeting. Key results
from the paper are summarized in these Slides
(along with some comparative results for Australia).
and Flexible Inflation Forecast Targets: An Empirical Investigation (with Graham
Version, April 2009. Targeting rules are an alternative to the Taylor rule for
thinking about how central banks should set monetary policy. Svensson (2003) and Woodford (2007) have argued that
central banks should implement monetary policy via forecast targeting rules.
Unlike the Taylor rule,
there is relatively little empirical evidence on whether any forecast targeting
rule is consistent with the data. We test some simple targeting rules implied
by the basic New Keynesian model for Australia, Canada and the United States.
The data suggest that all three countries are flexible inflation targeters, but
the relative weight given to output variations is not very large. Slides for presentation at HKIMR.
What do the RBA’s Forecasts Imply About
its Preferences over Inflation and Output Volatility? (with
Graham Voss) Economic Record, 2011, 84(267), 405-420.
Published Version. 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-half that given to inflation deviations. Data and Program Files.
Supply Elasticity Estimates for the Sydney Housing Market (with Emily Gitelman), Australian
Economic Review, 2012, 45(2), 176-190. Published Version. We present
estimates of the supply elasticity for residential property in metropolitan Sydney over the
period 1991-2006. Our
results suggest that supply is inelastic – less than unity – for
all types of housing; although the supply elasticity is relatively larger for
strata properties (apartments and flats) than for non-strata properties
(separate and semi-detached houses, terraces and town-houses). We also find
evidence of a significant fall in supply elasticity between 1991-1996 and
2001-2006, suggesting that housing supply in Sydney has become less elastic over time. Data Files. Program Files.
Prices, Rents and Rational Speculative Bubbles
in the Sydney Housing Market (with Eden Hatzvi). Economic Record, 2008, 84(267), 405-420. Published Version.
This paper offers an asset pricing explanation for the sharp rise in the
price-rent ratio for residential property in Sydney that occurred in the late
1990s – early 2000s. A full set of empirical results, referred to in the
published paper (but not reported) can be found in the October
2007 version. The main points of the paper can be found in Slides for ACE 07. An even earlier version of the
paper contains additional results – Old Version
(June 2007). Data and Program
The Growth of House Prices in Australian Capital Cities: What Do Economic
Fundamentals Explain? Australian Economic
Review, 2007, 40(3), 225-38. Published version. Paper contains empirical estimates of
the effect of mortgage rates on the growth rate of house prices in Australian
cities. Data File (Excel). An earlier version
of the paper is available as a Centre for Applied Economic Research (CAER) Working
The Response of Australian Consumption to
Housing Wealth (with Lance Fisher and Graham Voss). Journal of Macroeconomics, 2010, 32(1),
284-299. Published version. Large variations in house prices can
lead to significant changes in the level of household wealth. Using
Lettau and Ludvigson’s
(2004) cointegration approach, we investigate the
response of non-housing consumption to permanent and transitory changes in
financial and non-financial (housing) wealth in Australia
since the mid-1970s. The data provide evidence that housing wealth contains a
large transitory component, but up to 2004 at least, these transitory changes
in wealth are not associated with any significant response in consumption. When
post-2004 data are included in the estimation, there is some evidence that
household consumption responds to recent transitory rises in wealth and labor income. However this finding needs to be weighed
against weaker evidence of a cointegrating
relationship for consumption, income and wealth. Data
Discussion of “International Business Cycle Co-Movements Through
Time” by D Andrews and M Kohler in The
Changing Nature of the Business Cycle, (ed) C. Kent and D. Norman,
Proceedings of a Conference 11-12 July 2005, RBA, 220-224. link.
“Persistence of Output Fluctuations under Different
Exchange Rate Regimes,” (with Mark Crosby), Asian Economic Journal, 2003, 17(3), 281-296. Data File. An earlier
version can be found at
HKIMR WP 07/2001.
“Can an Intertemporal Model
Explain Australia's Current Account Deficit?” Australian Economic Review, 2003, 36(3),
350-359. Data and Program Files.
Effect of Terms of Trade Shocks on the Trade Balance: There is a Harberger Laursen-Metzler
Effect?” Journal of International
Money and Finance, 2003, 22(2), 155-184. Data File.
Australian-New Zealand Currency Union?” (with Mark Crosby), in G. de Brouwer,
(ed.), Financial Markets and Policies in
East Asia, Routledge, 2002, 325-335.
OECD Output Correlations,” (with Graham Voss and Luke Willard), RDP 2001-05,
Reserve Bank of Australia, 2001. link.
and the Real Exchange Rate – Evidence from 11 Countries,” (with Mark Crosby), HKIMR WP 8/2001. link.
Consumption, External Debt and the Real Interest Rate,” (with Graham Voss), Journal of Macroeconomics, 1995, 17(3), 471-494.
Smoothing and the Current Account,” (with Ross Milbourne),
Australian Economic Papers, December
a Present-value Model of the Current Account: Evidence from United States and
Canada,” Journal of International
Money and Finance, 1992 11(5), 414-430.
Investment and Economic Growth,” (with Ross Milbourne
Applied Economics, 2003, 35, 527-540.
Public Capital Provision Efficient?” (with Graham Voss), Journal of Monetary Economics, August 1998, 42, 47-66.
Capital and Private Sector Production,” (with Graham Voss), Southern Economic Journal, January 1996, 62(3), 723-738.
Capital and Private Sector Productivity: A Review of the Empirical
Evidence,” (with Graham Voss), The Economic and Labour Relations Review, 1995, 6(1), 52-70.
Infrastructure and Private Production,” (with Graham Voss), Agenda, 1995 2(2), 181-189.
Capital and Private Sector Productivity,” (with Graham Voss), The Economic Record, June 1994, 209, Vol. 70, 121-132.
Bank Operating Procedures: How the RBA Achieves its Target for the Cash
Rate,” Australian Economic Review, 2007, 40(2), 216-224.
Demand in General Equilibrium Endogenous Growth: Estimating the Role of a
Variable Interest Rate Elasticity,” (with Max Gillman), Quantitative and Qualitative Analysis in
Social Sciences, 2007, 1(1), 1-25. link
and the Capital Stock,” (with Mark Crosby), Journal of Money, Credit and Banking, May 2000, 32(2), 236-253.
“The Solow Residual for Australia: Technology Shocks or Factor
Hoarding?” Economic Inquiry,
January 1999, 17(1), 136-153.
Growth and Economic Policy in Australia,” Research Paper No. 19,
Department of the Parliamentary Library, 1997. link
Business Cycle Facts,” (with Lance Fisher and Graham Voss), Australian Economic Papers, December
Money: Interpreting Short-Run Dynamics Using Long-Run Restrictions:
Comment,” (with Ross Milbourne), Journal of Money, Credit and Banking, May
1996, 28(2), 272-278.
Business Cycles: An Introduction,” (with Mark Crosby), Australian Economic Review, 1995, 3rd Quarter, 53-70.
Unit Root Tests on Canadian Macroeconomic Time Series,” (with Tony Wirjanto), Economics
Letters, 1990, 34, 117-120.
of Canadian GDP, Monthly, 1962 to 1985”, (with Richard Guay,
Ross Milbourne and Gregor
Smith), L’Actualite Economique,
1990, 66(1), 14-30.