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The expectations hypothesis and its policy implications for Australia.

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Challen, D. W.(Donald William) (1975) The expectations hypothesis and its policy implications for Australia. Unspecified thesis, University of Tasmania.

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Abstract

The expectations hypothesis has received considerable
attention in the recent literature on inflation theory and policy.
This is due partly to the fact that it provides an appealing
explanation of the phenomenon of stagflation, the coexistence of
high unemployment with accelerating inflation, and partly to the
fact that it gives rise to the important distinction between the
short-run and the long-run inflation-unemployment trade-off and
to consequential challenging implications for the formulation of
anti-inflation policy. Despite the attention which the hypothesis
has received, the literature suffers from two notable deficiencies.
The first is general, namely that there is nowhere in the literature
a detailed theoretical analysis of the behavioural implications of
the expectations hypothesis. The second deficiency is specific to
the Australian literature namely that there has been no research
directed at examining the appropriateness of the expectations
hypothesis (at least in its conventional form) for the Australian
economy. One study has considered a modified form of the
expectations hypothesis with reference to the Australian economy but
that study has been shown to suffer from important methodological
and empirical deficiencies such that little faith can be placed in
its conclusions.
The two main aims of this thesis are related to the
deficiencies of the literature just mentioned. The first main aim
is to provide a complete and detailed theoretical analysis of the
behavioural implications of the expectations hypothesis and, as a iv.
corollary, to examine the relevance of these behavioural implications
for the formulation of anti-inflation policy. The second aim is
to determine empirically whether the expectations hypothesis can be
considered appropriate for the Australian economy. The achievement
of the latter aim is by no means straightforward, since the
statistical and data problems involved are considerable.
An introduction to the thesis is presented in Chapter One.
Four prototype models of the expectations hypothesis are specified
in Chapter Two which also undertakes an examination of their
behavioural implications and their implications for the formulation
of anti-inflation policy. Thus, the first of tho two main aims of
the thesis is achieved in Chapter Two. A review of the empirical
literature associated with the four prototype models is undertaken
in Chapter Three. The problems inherent in a consideration of the
appropriateness of these prototype models for the Australian economy
are considered in Chapter Four and the approach to these problems to
be adopted in the thesis is described. A description and critical
assessment of the adequacy of the data used for the purposes of the
econometric estimation of the parameters of the prototype models is
given in Chapter Five. The results of these estimations of the
structural parameters of various versions of the prototype models
are presented in Chapter Six and a preferred estimation selected for
each of the prototype models. This allows achievement of the second main aim of the thesis.
It is found that none of the prototypemodels can be considered appropriate for the Australian economy on
the basis of the specification of the models on which the estimates
reported in Chapter Six are based, but that at least one of the prototype models shows considerable promise. Finally, a number of ways in which the prototype models could be modified and
extended are considered in Chapter Seven, which concludes with
a number of suggestions for further work on the expectations hypothesis in the context of the Australian economy.

Item Type: Thesis (Unspecified)
Keywords: Inflation (Finance), Inflation (Finance)
Copyright Holders: The Author
Copyright Information:

Copyright 1975 the Author - The University is continuing to endeavour to trace the copyright
owner(s) and in the meantime this item has been reproduced here in good faith. We
would be pleased to hear from the copyright owner(s).

Additional Information:

Thesis (M.Ec.)--University of Tasmania, 1976. Bibliography: l. 231-241

Date Deposited: 25 Nov 2014 00:39
Last Modified: 28 Jun 2016 03:59
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