James Obben’s research while affiliated with Massey University and other places

This paper empirically examines the extent to which monetary discretion induces excess inflation without offsetting real growth gains in the long and short runs both directly and indirectly. First, a framework is developed to quantify monetary discretion and the corresponding behaviors it causes in inflation and growth. Second, using Pakistan's case, which is an example of a typical discretionary monetary policy strategy, not only the direct long and short-term effects of monetary discretion on inflation and real growth but its indirect effects on the latter via inflation are ascertained. In the long run monetary discretion is significantly biased against inflation without creating real growth gains and there is no trade-off between discretion-induced inflation and real growth. The short-term direct impact of monetary discretion on inflation and real growth is mixed—both positive and negative—with varying lags; however, the gains induced by monetary discretion do not outweigh the losses it induced. Moreover, the indirect impact of monetary discretion via inflation on real growth is significantly adverse. On balance, there is nothing to gain from monetary discretion and therefore the efficacy of the policy of its active use for possible growth gains at the expense of price stability warrants re-thinking.

Purpose The combination of low rates of private saving and projected increases in the fiscal burden of financing a public pension scheme for an ageing population poses a major policy challenge in New Zealand. Policy discourses espouse pension reform and the redoubling of household saving efforts. However, some of the policy options could have offsetting effects. To inform the debate with research findings, the purpose of this paper is to revisit the relationship between social security and household saving. Design/methodology/approach The paper employs a constructed social security wealth (SSW) variable in a hybrid life cycle‐permanent income consumption/saving model pioneered by Feldstein. Time series techniques are used. Findings The results show that an increase in the constructed gross SSW variable boosts saving. This suggests that concerns with accumulating assets to match the length of the implicit life expectancy at the current pension eligibility age overwhelm the view that the pension benefit is an adequate substitute for household assets. The other findings are consistent with a priori expectations: increases in disposable income boost saving; there is a significant propensity to consume out of household net wealth; and inflation and unemployment engender significant precautionary saving. Practical implications A policy to raise the retirement age may reduce the gross SSW and therefore the fiscal burden of the public pension scheme. However, in shortening the expected post‐retirement period that households have to save for, the policy may also reduce the saving rate. Originality/value Although the Feldstein approach has been used in studies in countries like Australia, Canada and the USA, a comparable study has not been undertaken in New Zealand. This study seeks to fill that void.

The theory of exchange rate determination clearly links a depreciating currency to a deteriorating trade balance, interest differential and related economic fundamentals. Empirical testing carried out routinely confirms these relationships in “normal†times as currencies constantly align themselves to find their places in the global marketplace. When depreciation reaches crisis proportions, they are not always caused by a proportional deterioration in economic fundamentals. Random activities like speculative attacks are prompted by perceived problems in the banking sector as well as the contagion effect, leading to a currency crisis. Using pre crisis data and focusing on the Indonesian rupiah, this view is confirmed in the research.

This study employs the cointegrating VAR approach to characterise the relationships between the five exchange rates comprising the TWI and the share market in New Zealand. Weekly data covering January 1999 to June 2006 are analysed. The study discovers there are two types of long-run relationship mimicking the portfolio balance and goods market theories. That implies there is bi-directional causality in the foreign exchange and stock markets in both the short run and long run although different exchange rates may be implicated. In the long run, the empirical results for the relationship between the NZ-US dollar exchange rate and the overall share market index support both the portfolio balance and goods market theories. In the short run, the portfolio balance theory is further supported by all the exchange rates but the goods market theory is supported significantly only by the NZ-Australian dollar exchange rate. Thus the evidence is predominantly in support of the portfolio balance theory and that the firms most at risk of foreign exchange rate exposure are those that export to Australia.

Illiquidity is at the core of the various currency and banking/financial crises of the 1990s. In the wake of the Asian crisis of 1997/98 the term "systemic liquidity" has been coined to refer to adequate arrangements and practices which permit efficient liquidity management and which provide a buffer during financial distress. A constructed balance- sheet-based variable that captures the essence of the risk from systemic liquidity is funding volatility ratio, FVR. Using data covering January 1990 to July 2003 and employing cointegration techniques, this study attempts to quantify the purported link between FVR and the measurable determinants of a balanced liquidity infrastructure for Indonesia, the country that suffered the most from the Asian crisis. A good fit is obtained for the dynamic regression model and estimates of short-run and long-run impacts and elasticities are computed. FVR is shown to be increasing in the rupiah-US dollar exchange rate, the Jakarta stock market index, interest rate and the number of banks, and decreasing in capital:asset ratio and foreign liabilities: total asset ratio. The best option for lowering the FVR in the short run is increasing bank capital; over the long term enduring increases in foreign-currency accounts and reduction in the number of banks seem to hold the best prospect for lowering the FVR.

The exporting successes of small and medium-sized enterprises (SMEs) in industrialized countries have led to the increasing recognition of the potentially critical role of SMEs in export- and private-sector-Ied economic growth in many developing countries. Policies to assist more SMEs to export must be informed by any systematic differences between current exporters and non-exporters. This study employs the logit model to ascertain the explicability of why some SMEs are exporters and some are not (export propensity) in Swaziland, a small, landlocked African country. The often-used firm-specific and manager-related variables are utilized and a good fit is obtained. Foreign language proficiency is very highly significant in explaining high export propensity; so is the frequency of business-related foreign trips. A quadratic specification of the age-of-manager variable seems to resolve the seemingly contradictory effects of that variable reported in previous studies based on linear specification. Effectual policies must aim at upgrading the language skills of managers, assist with bona fide business-related foreign travel and target managers at the low-medium bracket of the age range.

A logit model of the incidence of long-term unemployment is estimated using a random sample of completed unemployment spells in New Zealand over the period 1988-97. The regressions results are sensible, but the predictive power of the model seems to depend on the share of long-term unemployed in total unemployment. In particular, if one-third or less of annual observations are made up of long-term unemployment spells, the model is incapable of predicting any such spells, unless it is constrained to do so.

Exchange rate theories clearly link a depreciating currency to a deteriorating trade balance, the domestic -foreign interest rate differential and related economic fundamentals. Empirical testing, carried out routinely, confirms these relationships in "normal" times, as currencies constantly align themselves in the global marketplace. When currency depreciation reaches crisis proportions, it is not always caused by a proportional deterioration in economic fundamentals. Non-recurrent activities like speculative attacks are prompted by perceived problems in the banking sector and the contagion effect, leading to a currency crisis. Using quarterly data traversing the crisis period in Indonesia, this paper confirms the latter view.