International Shocks and the Role of Domestic Policy in Australia
AbstractIn the presence of large international disturbances small open economies are faced with difficult policy choices. International conditions impact on domestic outcomes. Using a structural VAR model of the Australian economy I explore the ways in which domestic monetary policy contributes to the output outcomes experienced in the economy. The focus is on the impact of international shocks. Monetary policy is modelled using a cash rate response to GNE, inflation and real exchange rate shocks. The results show that removing the focus on either GNE or inflation leads to lower GDP outcomes for the economy. The challenge for domestic policy is to recognise and respond to international and domestic shocks to the maximum benefit of the domestic economy.
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Bibliographic InfoArticle provided by Bankwest Curtin Economics Centre (BCEC), Curtin Business School in its journal Australian Journal of Labour Economics.
Volume (Year): 5 (2002)
Issue (Month): 2 (June)
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Postal: GPO Box U1987, Perth WA 6845
Web page: http://business.curtin.edu.au/research/publications/journals/ajle/
More information through EDIRC
Monetary Policy (Targets; instruments; and Effects); Open Economy Macroeconomics;
Other versions of this item:
- Mardi Dungey, 2001. "International Shocks and the Role of Domestic Policy in Australia," CEPR Discussion Papers 443, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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- Mardi Dungey & Adrian Pagan, 2008.
"Extending an SVAR Model of the Australian Economy,"
NCER Working Paper Series
21, National Centre for Econometric Research.
- Philip Liu, 2008. "The Role of International Shocks in Australia’s Business Cycle," RBA Research Discussion Papers rdp2008-08, Reserve Bank of Australia.
- Philip Liu, 2007. "Stabilizing The Australian Business Cycle: Good Luck Or Good Policy?," CAMA Working Papers 2007-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
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