Ian Martin McDonald

University of Melbourne, Melbourne, Victoria, Australia

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Publications (73)10.44 Total impact

  • Ian M. McDonald
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    ABSTRACT: At the current time, the measurement of well‐being is the subject of controversy and debate. This introduction briefly summarises the four contributions to this debate published in this Policy Forum. All the articles are critical of using gross domestic product per capita as a measure of well‐being and offer various suggestions for an improved measure.
    Australian Economic Review 03/2013; · 0.27 Impact Factor
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    Ross Guest, Ian M. McDonald
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    ABSTRACT: In this paper a method for calculating the socially optimal level of aggregate investment is developed. That method is then applied to Japan. It is found that in the 1990's the level of investment in Japan was excessive, in the sense that it exceeded the socially optimal level. The degree of over-investment in Japan in the 1990's has averaged about 5.5 per cent of GDP per year according to the calculations in this paper. Yes Yes
    The Singapore Economic Review 11/2011; · 0.14 Impact Factor
  • Ian M. McDonald
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    ABSTRACT: This paper shows that microeconomic foundations from behavioural economics, in particular prospect theory and loss aversion, can explain the limited flexibility of money wages and prices in business cycle downswings. Empirical evidence shows that an increase in the rate of unemployment tends to decrease wage and price inflation. However, inflation tends to stabilize when unemployment has peaked. This mix of “change and settle” is called in this paper the limited flexibility of money wages and prices. It can be explained by the model presented in this paper. The paper also shows that behavioural economics can underpin the Keynesian proposition that changes in the level of nominal aggregate demand can have long-lasting real effects on the level of activity and does so without violating rational expectations.
    08/2010;
  • ROSS GUEST, IAN McDONALD
    Economic Papers A journal of applied economics and policy 04/2010; 18(3):34 - 48.
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    Ross Guest, Ian M. McDonald
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    ABSTRACT: This paper provides a new rationale for Uzawa preferences based on social choice; instead of positing that poor people are more patient because they are poor, it posits that poor people should be more patient if they wish their living standards to catch up with richer people. To provide a setting for this new rationale, the present paper studies the socially optimal choice of living standards over time by social planners for countries that, from low levels of total factor productivity (TFP), experience a gradual catch-up of their TFP level with that of the leader country. In the TFP catch-up scenario, the socially optimal choice of consumption and saving based on time additive preferences leads to no catch-up of living standards. To generate living standard catch-up we propose other-regarding Uzawa preferences, in which the rate of time preference is influenced by the gap in living standards between follower country and leader country. This other-regarding specification is consistent with recent findings emphasized in behavioural economics. The other-regarding Uzawa preferences form is illustrated quantitatively by simulating a model of the world economy. Yes Yes
    Pacific Economic Review 01/2010; · 0.56 Impact Factor
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    Ian M. McDonald
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    ABSTRACT: Conventional economics, which is based on Homo economicus, cannot provide a satisfactory explanation for the global financial crisis. However, behavioural economics, and the concept of present bias, self-serving bias, ‘new era’ stories, money illusion, comparisons with reference levels and herding, can provide an explanation.
    Economic Papers A journal of applied economics and policy 12/2009; 28(3):249 - 254.
  • Ian M. McDonald
    Australian Economic Review 09/2008; 41(3):283 - 285. · 0.27 Impact Factor
  • Ian M. McDonald
    Australian Economic Review 06/2008; 26(2):31 - 34. · 0.27 Impact Factor
  • Ian M. McDonald
    Australian Economic Review 06/2008; 25(3):74 - 94. · 0.27 Impact Factor
  • Ian M. McDonald
    Australian Economic Review 06/2008; 41(2):222 - 228. · 0.27 Impact Factor
  • Ian M. McDonald
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    ABSTRACT: This article reviews macroeconomic policy in Australia since the 1960s. It is argued that economic thinking by Australian governments progressed from a Keynesian approach to a classical approach in 1975 and then to a Keynesian-classical synthesis in 1983. To the usual major indicators of macroeconomic performance, unemployment and inflation, the article adds a third indicator, called thrift. Thrift is a measure of how society is allocating its resources between current and future consumption. The record of thrift for Australia since the 1960s is described and evaluated.
    Australian Economic Review 01/2008; 18(3):6 - 19. · 0.27 Impact Factor
  • Ian M. McDonald
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    ABSTRACT: Australia's current account deficit is large by historical standards and so is the boom in private investment spending. The net effect is a level of thrift that is not unusually low. A major uncertainty facing policymakers is how far unemployment can be reduced without causing an inflationary spiral. If unemployment can be reduced without igniting inflation, then there is a case for loosening monetary policy.
    Australian Economic Review 01/2008; 22(2):25 - 28. · 0.27 Impact Factor
  • Jeanette Ngaire Lye, Ian Martin McDonald, Jenny Lye
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    ABSTRACT: The asymptotic distributions of cointegration tests are approximated using the Gamma distribution. The tests considered are for the I(1), the conditional I(1), as well as the I(2) model. Formulae for the parameters of the Gamma distributions are derived from response surfaces. The resulting approximation is flexible, easy to implement and more accurate than the standard tables previously published.
    International Advances in Economic Research 01/2008; 14(2):125-141.
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    Ian Martin Mcdonald
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    ABSTRACT: Unemployment in Australia is now at its lowest in over 30 years. This experience of low rates of unemployment has prompted a number of statements that the Australian economy is at or very close to full employment. However, even though unemployment is low in comparison with the previous 30 years, it is greater than the rates experienced in the 1950s and 1960s, during which the average was slightly below two per cent. Furthermore, the 4.4 per cent rate of unemployment in April 2007 included 84,000 who had been unemployed for more than a year. These doubts about whether the Australian economy is currently at full employment are supported by findings of a body of research reported in this paper. This research suggests that, given current policy settings on labour market regulation, microeconomic reform and welfare support, full employment may occur at a rate of unemployment as low as 2.5 per cent. The estimation of this low rate of unemployment is based on a model of a range of equilibrium rates of unemployment.
    08/2007;
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    ABSTRACT: In this paper, we examine eight years of Quality of Teaching (QOT) responses from an Economics Department in an Australian University. This is done to determine what factors, besides the instructor, have an impact on the raw average student evaluation scores. Most of the previous research on student ratings has been conducted in the US. One significant difference between US and Australian tertiary education is that, on average, the number of foreign undergraduate students in Australia is ten times the number in US institutions. We find that cultural background significantly affects student evaluations. Other factors that have an influence on the average QOT score include: year level; enrolment size; the quantitative nature of the subject; the gender of the student; fee-paying status by gender; course of study; the differences between the course mark and previous marks; the quality of workbooks; the quality of textbooks; and the QOT score relative to those in other subjects taught at the same time. In addition, average QOT scores for instructors who have taught in a mix of subjects are similar to those based on scores adjusted to account for subject and student characteristics. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd/University of Adelaide and Flinders University .
    Australian Economic Papers 02/2007; 46(1):18-38. · 0.11 Impact Factor
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    Ian Martin McDonald, Mark Peter Wooden, Ross Williams
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    ABSTRACT: No abstract available.
    Australian Economic Review 02/2007; 40(1):1-2. · 0.27 Impact Factor
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    Ross Guest, Ian M. McDonald
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    ABSTRACT: Yes Yes
    Economic Modelling 02/2007; · 0.70 Impact Factor
  • Ian Martin McDonald, Mark Peter Wooden, Ross Williams
    Australian Economic Review 01/2007; 44(1):121-122. · 0.27 Impact Factor
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    Jeanette Ngaire Lye, Ian Martin McDonald, JENNY N. LYE
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    ABSTRACT: In this paper we compare the estimates of the range model in Lye and McDonald (2005a) with estimates of a natural rate model. We find that the range model is superior to the natural rate model according to econometric criteria and economic plausibility. Our estimates of the range model suggest that a significantly lower rate of unemployment is obtainable at the current time by aggregate demand policy, indeed a rate of 3.1 per cent for 2003:3 compared with about 6.5 per cent for the natural rate model. Thus we conclude that basing macroeconomic policy on the natural rate model would underrate the possibilities for economic welfare in Australia. Copyright Blackwell Publishing Ltd/ University of Adelaide and Flinders University 2006.
    Australian Economic Papers 02/2006; 45(3):227-240. · 0.11 Impact Factor
  • Ian Martin McDonald, LAN LU
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    ABSTRACT: This paper, through simulating an open economy model of China, investigates whether the current rate of saving in China is excessive. The model incorporates the major factors that influence optimal saving, namely demographic change, the catch-up of total factor productivity in China to the level of high-income OECD countries, and an endogenous world rate of interest. The paper finds that the rate of time preference that would imply the current rate of saving is optimal is very low; in fact, it is negative. Thus, to justify China's current rate of saving, the social planner would have to put a higher weight on the economic welfare of future generations relative to the current generation, indeed up to 19 times the weight. This suggests that the current rate of saving in China is excessive.
    The Singapore Economic Review 02/2006; 51(03):283-301. · 0.14 Impact Factor