This paper builds a unifying framework based on the theory of intertemporal consumption choices that brings together the limited participation-based explanation of the C-CAPM poor empirical performance and the transaction costs-based explanation of incomplete portfolios. Using the implications...

Over much of the past 25 years, the cycles of house price and consumption growth have been closely synchronised. Three main hypotheses for this co-movement have been proposed in the literature. First, that an increase in house prices raises households' wealth, particularly for those in a...

East Asia and Latin America have diverged in several dimensions in the past three decades. This paper compares household saving behavior in two countries in each region (Mexico, Peru, Thailand and Taiwan). We make four contributions. First, we provide the first comparisons of savings in these...

We investigate the empirical significance of borrowing constraints in the market for consumer loans. We set up a theoretical model of consumer loan demand, which in the presence of credit rationing implies restrictions on the elasticities of loan demand with respect to the interest rate and the...

The paper gives an overview of recent work in the development of the RBII macroeconomic model, focussing on adjustments designed to reflect the post-deregulation financial environment. Changes to the RBII model have been made in two main areas. First, a clearing market for short-term funds has...

This paper investigates simple monetary policy rules using a theoretical model of a small open economy. The anlysis is intended to highlight two problems in policy formulation that are of particular importance to Australia: instability of the money demand function, and exposure of the economy to...

Economic theory offers two distinct approaches to the modelling of interest rates. At the microeconomic level, interest rates are modelled as an outcome of intertemporal optimisation by investors, so that real interest rates are determined entirely by the real variables that characterise risk....

This paper provides a theoretical analysis of monetary policy rules specified in terms of an interest rate instrument, in contrast to the usual assumption that the instrument is a monetary quantity. The analysis is presented using a neoclassical dynamic model. It begins by summarising some...

This book examines poverty as a structural problem caused by the way economic systems operate. It poses a simple question: Why do poor people earn less? Case studies in Bolivia, Brazil, Chile, Colombia, Costa Rica and Peru find the poor caught in a vicious circle. They lack sufficient access to...