Sources of Exchange Rate and Price Level Fluctuations in Two Commodity Exporting Countries: Australia and New Zealand

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Sources of Exchange Rate and Price Level Fluctuations in Two Commodity Exporting Countries: Australia and New Zealand

Author Info

Fisher, Lance A

Abstract

Dynamic interactions between the exchange rate, domestic price level, and terms of trade of Australia and New Zealand, relative to the United States, are evaluated. Under the restriction that a nominal shock has no long-run effect on the relative terms of trade, real shocks dominate nominal shocks in accounting for fluctuations in real and nominal exchange rates. For Australia, real shocks that improve the relative terms of trade have a negligible effect on the domestic price level relative to that of the United States but, for New Zealand, there is a significant permanent increase in the relative domestic price level. Copyright 1996 by The Economic Society of Australia.

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Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 72 (1996)
Issue (Month): 219 (December)
Pages: 345-58
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Handle: RePEc:bla:ecorec:v:72:y:1996:i:219:p:345-58

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Valadkhani, Abbas & Layton, Allan P. & Karunaratne, Neil D., 2005. "Export Price Volatility in Australia: An Application of ARCH and GARCH Models," Economics Working Papers wp05-11, School of Economics, University of Wollongong, NSW, Australia. [Downloadable!]

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