Global Perspectives in Economic Policy

Global Perspectives on Economic Policy

New research initiative brings researchers and policymakers together to improve models for open economies.

Written by Professor James Morley

Image: Perry Warjiyo, Governor of Bank Indonesia presents his lecture at the University of Sydney

A number of members of the School of Economics are involved in a Faculty of Arts and Social Sciences research theme “Global Perspectives on Economic Policy”. The focus of the initiative is to investigate how macroeconomic and trade policies impact open economies, such as Australia’s.

The Global Perspectives research theme has been funded since mid 2018 as one of the “FutureFix” projects sponsored by the Faculty of Arts and Social Sciences and has supported a number of activities designed to improve research on open economies. These activities involve close interaction and collaboration with policymakers throughout the Asia-Pacific region and beyond to develop more useful models for economic policy analysis from a more global perspective.

A highlight example of our activities has been the development of the Sydney Open Economy Model Hub (sydney.edu.au/arts/open-economy-model-hub). The model hub provides free access to code for a variety of economic models and econometric tools that are particularly relevant for open economies. This includes the multisector DSGE model used by the Reserve Bank of Australia to perform scenario forecasting. The most recent version of the model that includes a housing sector was developed by Dr Christopher Gibbs, a Senior Lecturer in the School of Economics, along with researchers from the Reserve Bank. Other available models can be used to examine the effects of unconventional macroeconomic policies such “forward guidance” when economies hit the zero lower bound on interest rates. Some future models to be made available are related to the $349,000 ARC Discovery Project from 2019-2021 on “Fiscal Policy and Unemployment in an Open Economy” awarded to Professors Mariano Kulish and James Morley in the School of Economics and will address sectoral shifts in labour markets and long-term changes in commodity prices.

We have also launched a podcast series featuring conversations with economists from various policy institutions worldwide who have visited the University of Sydney as part of the Global Perspectives initiative or remotely following the COVID-19 crisis. These conversations are designed to improve understanding of the role of economic models and research in policymaking, with a particular focus on the need for models that are relevant to open economy settings. The podcasts are available at sydney.edu.au/arts/global-perspectives and have included researchers from the Federal Reserve System, the Norges Bank, and the Bank of Finland. In early 2020, a podcast with Andy Neumeyer, former Chief Economist of the Central Bank of Argentina, addressed the particular challenges for macroeconomic policy in

Images: Guest Benjamin Wong with podcast hosts, Chris Gibbs and Aarti Singh (left), podcasting online with Aarti Singh, Mariano Kulish, Chris Gibbs, guest Bruce Preston and James Morley (right)

emerging economies. In another podcast, Galina Hale, a Research Advisor at the Federal Reserve Bank of San Francisco, shared her insights into role of economic research in informing policy at the Fed during the global financial crisis, the European sovereign debt crisis, and Brexit. More recently, we have discussed the consequences and policy implications of the COVID crisis with a number of researchers, including Callum Jones from the Federal Reserve Board of Governors and Greg Kaplan from the University of Chicago.

Our team members are involved in research collaboration with economists from the Bank for International Settlements, the International Monetary Fund, the Australian Treasury, the Bank of Canada, the Reserve Bank of Australia, and the Bank of Finland, amongst others. The Global Perspectives initiative has supported this collaboration through visits to University of Sydney by researchers from policy institutions and by our team members to the relevant policy institutions.

We also hosted two highly successful public lectures by senior policymakers in 2019. The first, in July of that year, was a lecture on central bank communication strategies by Eli Remolona, former Regional Head for Asia and the Pacific at the Bank for International Settlements and current Director of Central Banking at the Asia School of Business. The second, in October 2019 was a lecture on the evolution of central bank policy tools to maintain price stability while safeguarding financial stability by Perry Warjiyo, Governor of Bank Indonesia, with a Q&A moderated by Dr Luci Ellis, Assistant Governor (Economic) at the Reserve Bank of Australia.

Future activities include more formal interactions with policy institutions in Australia and overseas to further develop models that are relevant beyond the large economy context of the United States or European Union. We also plan to increase the number of PhD students at the University of Sydney working on dissertation topics related to open economy issues.

Also, keep an eye out for events including public lectures, virtual or otherwise, related to the Global Perspectives theme in 2021!

James Morley is Professor of Macroeconomics at the University of Sydney and Co-Director of the “Global Perspectives on Economic Policy” initiative for the Faculty of Arts & Social Sciences. He is a Fellow of the International Association for Applied Econometrics and Co-Editor of The Economic Record. His research is on the empirical analysis of business cycles, stabilization policy, and sources of persistent changes in macroeconomic and financial conditions.

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Captions 1. Eli Remolona presenting his lecture, 50 Ways to Leave Your Lover 2. Professor Mariano Kulish, Dr Denny Lie, Eli Remolona and Professor James Morley 3. Governor of Bank Indonesia, Perry Warjiyo with Luci Ellis (Assistant Governor (Economic) at the Reserve Bank of Australia 4. Governor of the Reserve Bank of Australia, Phillip Lowe shakes hands with Governor of Bank Indonesia, Perry Warjiyo 5. Luci Ellis and School of Economic academics with the Bank Indonesia delegation [2]

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