Publications

Jackson, J, McIver, R, Bajada, C & Hettihewa, S 2004, Economic principles (1st edition), McGraw Hill, Sydney, Australia.

Docherty, PT, Terry, C & Trayler, RM 2004, 'The impact of the Basel II capital accord on Australian banks.' in Gup, B (ed), The new basel capital accord, Thomson, New York, USA, pp. 305-335.

Baddeley, MC 2004, 'Are Tourists Willing to Pay for Aesthetic Quality? An Empirical Assessment from Krabi Province, Thailand', Tourism Economics, vol. 10, no. 1, pp. 45-61.
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This paper assesses the relationships between the viability of the tourism industry and willingness to pay for aesthetic aspects of environmental quality. Incentives to provide high-quality tourism are limited given asymmetric information, adverse selection and positive search costs, with implications both for the sustainability of the tourism industry and for environmental sustainability more broadly defined. An econometric model is estimated in which willingness to pay is captured using resort rents and related to aesthetic quality, after controlling for service levels. A negative relationship is found. Some policy issues are assessed, focusing on the implications for tourism as an engine for sustainable development.

Baddeley, MC, Curtis, A & Wood, R 2004, 'An introduction to prior information derived from probabilistic judgements: elicitation of knowledge, cognitive bias and herding', Geological Society, London, Special Publications, vol. 239, no. 1, pp. 15-27.
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AbstractOpinion of geological experts is often formed despite a paucity of data and is usually based on prior experience. In such situations humans employ heuristics (rules of thumb) to aid analysis and interpretation of data. As a result, future judgements are bootstrapped from, and hence biased by, both the heuristics employed and prior opinion.This paper reviews the causes of bias and error inherent in prior information derived from the probabilistic judgements of people. Parallels are developed between the evolution of scientific opinion on one hand and the limits on rational behaviour on the other. We show that the combination of data paucity and commonly employed heuristics can lead to herding behaviour within groups of experts. Elicitation theory mitigates the effects of such behaviour, but a method to estimate reliable uncertainties on expert judgements remains elusive.We have also identified several key directions in which future research is likely to lead to methods that reduce such emergent group behaviour, thereby increasing the probability that the stock of common knowledge will converge in a stable manner towards facts about the Earth as it really is. These include: (1) measuring the frequency with which different heuristics tend to be employed by experts within the geosciences; (2) developing geoscience-specific methods to reduce biases originating from the use of such heuristics; (3) creating methods to detect scientific herding behaviour; and (4) researching how best to reconcile opinions from multiple experts in order to obtain the best probabilistic description of an unknown, objective reality (in cases where one exists).

Delli Gatti, D, Di Guilmi, C, Gaffeo, E & Gallegati, M 2004, 'Bankruptcy as an exit mechanism for systems with a variable number of components', Physica A: Statistical Mechanics and its Applications, vol. 344, no. 1-2, pp. 8-13.
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Dynamical systems with components whose sizes evolve according to multiplicative stochastic rules have been recently combined with entry and exit processes. We show that the assumptions usually made in modeling exits are at odds with the available evidence. We discuss a recently proposed macroeconomic model with random multiplicative shocks and a mechanism for exit based on bankruptcy, which displays several observed stylized facts for firms' dynamics, like power law distributions for firms' sizes and Laplace distributions for firms' growth rates

DELLI GATTI, D, DI GUILMI, C, GAFFEO, E, GIULIONI, G, GALLEGATI, M & PALESTRINI, A 2004, 'BUSINESS CYCLE FLUCTUATIONS AND FIRMS' SIZE DISTRIBUTION DYNAMICS', Advances in Complex Systems, vol. 07, no. 02, pp. 223-240.
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Power law behavior is an emerging property of many economic models. In this paper we emphasize the fact that power law distributions are persistent but not time invariant. In fact, the scale and shape of the firms' size distribution fluctuate over time. In particular, on a log–log space, both the intercept and the slope of the power law distribution of firms' size change over the cycle: during expansions (recessions) the straight line representing the distribution shifts up and becomes less steep (steeper). We show that the empirical distributions generated by simulations of the model presented in Ref. 11 mimic real empirical distributions remarkably well.

Di Guilmi, C, Gaffeo, E & Gallegati, M 2004, 'Empirical results on the size distribution of business cycle phases', Physica A: Statistical Mechanics and its Applications, vol. 333, pp. 325-334.
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We study the size distribution of business cycles phases, that is expansions and contractions, for a sample of 16 industrialized countries over 120 years. We find that the best-fitting distribution for both expansions and contractions is Weibull, meaning that business cycles possess a characteristic scale. Furthermore, we discuss how parameters estimates can be used to make inference on the probability a typical episode ends, that is on what economists call turning points.

Engle-Warnick, J & Slonim, RL 2004, 'The evolution of strategies in a repeated trust game', Journal of Economic Behavior & Organization, vol. 55, no. 4, pp. 553-573.
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Fujiwara, Y, Aoyama, H, Di Guilmi, C, Souma, W & Gallegati, M 2004, 'Gibrat and Pareto–Zipf revisited with European firms', Physica A: Statistical Mechanics and its Applications, vol. 344, no. 1-2, pp. 112-116.
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A firms growth and failure are the two sides of the same coin. This paper reports new phenomenological findings for firm size distribution and growth, and bankruptcy. This paper is based on [Y. Fujiwara et al., Physica A 335 (2004) 197] and on [Y. Fujiwara, Physica A 337 (2004) 219]. See also these proceedings for kinematical relationship between Pareto-Zipf and Gibrat's laws. © 2004 Elsevier B.V. All rights reserved.

Fujiwara, Y, Di Guilmi, C, Aoyama, H, Gallegati, M & Souma, W 2004, 'Do Pareto–Zipf and Gibrat laws hold true? An analysis with European firms', Physica A: Statistical Mechanics and its Applications, vol. 335, no. 1-2, pp. 197-216.
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By employing exhaustive lists of large firms in European countries, we show that the upper-tail of the distribution of firm size can be fitted with a power-law (ParetoZipf law), and that in this region the growth rate of each firm is independent of the firm's size (Gibrat's law of proportionate effect). We also find that detailed balance holds in the large-size region for periods we investigated; the empirical probability for a firm to change its size from a value to another is statistically the same as that for its reverse process. We prove several relationships among ParetoZipf's law, Gibrat's law and the condition of detailed balance. As a consequence, we show that the distribution of growth rate possesses a non-trivial relation between the positive side of the distribution and the negative side, through the value of Pareto index, as is confirmed empirically.

Goeree, JK, Wooders, J & Plott, CR 2004, 'BIDDERS' CHOICE AUCTIONS: RAISING REVENUES THROUGH THE RIGHT TO CHOOSE', JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION, vol. 2, no. 2-3, pp. 504-515.
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Guilmi, CD, Gallegati, M & Ormerod, P 2004, 'Scaling invariant distributions of firms’ exit in OECD countries', Physica A: Statistical Mechanics and its Applications, vol. 334, no. 1-2, pp. 267-273.
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Self-similar models are largely used to describe the extinction rate of biological species. In this paper we analyse the extinction rate of firms in eight OECD countries. Firms are classified by industrial sectors and sizes. We find that while a power-law distribution with exponent close to 2 fits the extinction rate very well by sector, a Weibull distribution is more appropriate if one analyses the firms size.

Menzies, G 2004, 'Money to burn, or melt? A cost-benefit analysis of Australian polymer banknotes', The North American Journal of Economics and Finance, vol. 15, no. 3, pp. 355-368.
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Australia, New Zealand and Romania have all fully adopted polymer (plastic) banknotes, and another 18 countries have issued at least one polymer note. The invention of polymer banknotes in Australia was motivated primarily by concern about counterfeiting. However, this paper shows that the transition was economically advantageous. Within 10 years of the introduction of polymer notes, the net benefit was around $A 90 million ($U.S. 65 million). © 2004 Elsevier Inc. All rights reserved.

Menzies, GD 2004, 'First-best debt relief', Economics Letters, vol. 82, no. 3, pp. 301-306.
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Menzies, GD 1970, 'Core western values', -, Humans and machines conference, -, Sydney, Australia.

Menzies, GD 1970, 'First-best debt relief', ECONOMICS LETTERS, Seminar Presentation, School of Finance and Economics, University of Technology, Sydney, ELSEVIER SCIENCE SA, Sydney, Australia, pp. 301-306.
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Hausknecht, M, Johnson, T & Bajada, C Australian Bureau of Statistics 2004, The Underground Economy and Australia's GDP, pp. 1-57, Australia.
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A publication titled Measuring the Non-Observed Economy: A Handbook, was released in 2002. It was jointly authored by Organisation for Economic Cooperation and Development (OECD), the International Monetary Fund, the International Labour Organisation and the Commonwealth of Independent States and was produced for the benefit of both producers and users of the national accounts. The Handbook's key aim is to identify and promote best statistical practice so as to ensure estimates of GDP and its components are as exhaustive as possible within the boundary of economic production as prescribed in the System of National Accounts 1993. The Handbook provides an internationally developed framework against which countries can review their current treatment of unobserved transactions in the national accounts.

Goldbaum, D & Mizrach, B 2004, 'Estimating the Intensity of Choice in a Dynamic Mutual Fund Allocation Decision'.
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We estimate the intensity of choice parameter in heterogenous agent models in both a static and dynamic setting. Mean-variance optimizing agents choose among mutual funds of similar styles but varying performance. Actively managed funds have a lower Sharpe ratio than passive index funds, yet they attract a majority share of asset allocation. By estimating the relative growth of passive funds, we obtain a dynamic estimate of the intensity of choice calibrated to 10 years of mutual fund flows.