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A Medium‐Scale New Keynesian Open Economy Model of Australia

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  • JARKKO P. JÄÄSKELÄ
  • KRISTOFFER NIMARK

Abstract

We estimate a new Keynesian open economy dynamic stochastic general equilibrium model of Australia with a large number of shocks, frictions and rigidities, matching a large number of observable time series. We find that both foreign and domestic shocks are important drivers of the Australian business cycle. We also find that the initial impact on inflation of an increase in demand for Australian commodities is negative, because of an improvement in the real exchange rate, although there is a persistent positive effect on inflation that dominates at longer horizons.

Suggested Citation

  • Jarkko P. Jääskelä & Kristoffer Nimark, 2011. "A Medium‐Scale New Keynesian Open Economy Model of Australia," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 11-36, March.
    • Handle: RePEc:bla:ecorec:v:87:y:2011:i:276:p:11-36
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    File URL: http://hdl.handle.net/10.1111/j.1475-4932.2010.00688.x
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    More about this item

    Keywords

    C11 ; E40 ; E52 ;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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