The New Economy and the Dollar Puzzle: the Case of Australia
The revolutionary changes in information technology (IT), globalisation and financial innovation have overturned the Solow productivity paradox and spawned a New Economy (NE) in Australia in the late 1990s. Both growth accounting estimates and the use of the information superhighway ranks Australia next to the USA as a NE. Australia is an avid user but not a producer of IT that propels the NE. The debate on the need for a new paradigm for the new economy on the grounds that key mechanisms of the old paradigm have become obsolete is reviewed. The breakdown of the short-run Phillips curve tradeoff and the redundancy of the long-run speed limits to growth are examined and dismissed as poppycock both on theoretical and empirical grounds. The IT technology because it is subject to severe diminishing returns and problems of information overload fails to rank with the great inventions of the past and will not be a harbinger of the Third Industrial Revolution. Nonetheless, on the basis of the 'delay hypothesis' the dismissal of the case for a new paradigm for the NE may be premature at this stage. The paper also examines the puzzling nose-dive of the dollar during the first half of the year 2001. This occurred despite the strong macroeconomic fundamentals and the emergent NE. The paper concludes commenting on the policy reaction function for a small open NE committed to inflation targeting.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: St. Lucia, Qld. 4072|
Phone: +61 7 3365 6570
Fax: +61 7 3365 7299
Web page: http://www.uq.edu.au/economics/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonathan Coppel, 2000. "E-Commerce: Impacts and Policy Challenges," OECD Economics Department Working Papers 252, OECD Publishing.
- Froot, Kenneth A & Thaler, Richard H, 1990. "Foreign Exchange," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 179-92, Summer.
- Aghion, P. & Howitt, P., 1989.
"A Model Of Growth Through Creative Destruction,"
UWO Department of Economics Working Papers
8904, University of Western Ontario, Department of Economics.
- Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
- Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
- Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
- David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
- Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
When requesting a correction, please mention this item's handle: RePEc:qld:uq2004:305. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SOE IT)
If references are entirely missing, you can add them using this form.