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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 443.
Length: 42 pages
Date of creation: Dec 2001
Date of revision:
VAR; open economy; monetary policy;
Other versions of this item:
- Mardi Dungey, 2002. "International Shocks and the Role of Domestic Policy in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 5(2), pages 143-163, June.
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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.:
- Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001.
"One decade of inflation targeting in the world : What do we know and what do we need to know?,"
Working Papers Central Bank of Chile, Central Bank of Chile
101, Central Bank of Chile.
- Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One Decade of Inflation Targeting in the World: What Do We Know and What Do We Need to Know?," NBER Working Papers 8397, National Bureau of Economic Research, Inc.
- Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, American Economic Association, vol. 90(2), pages 1-16, May.
- Laurence Ball, 2002.
"Policy Rules and External Shocks,"
Central Banking, Analysis, and Economic Policies Book Series,
in: Norman Loayza & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series (ed.), Monetary Policy: Rules and Transmission Mechanisms, edition 1, volume 4, chapter 3, pages 047-064
Central Bank of Chile.
- Laurence Ball, 2000. "Policy Rules and External Shocks," Working Papers Central Bank of Chile, Central Bank of Chile 82, Central Bank of Chile.
- Laurence Ball, 2000. "Policy Rules and External Shocks," NBER Working Papers 7910, National Bureau of Economic Research, Inc.
- Andrea Brischetto & Graham Voss, 1999. "A Structural Vector Autoregression Model of Monetary Policy in Australia," RBA Research Discussion Papers, Reserve Bank of Australia rdp1999-11, Reserve Bank of Australia.
- Hyeon-Seung Huh, 1999. "How well does the Mundell-Fleming model fit Australian data since the collapse of Bretton Woods?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 31(3), pages 397-407.
- Summers, Peter M., 2001. "Forecasting Australia's economic performance during the Asian crisis," International Journal of Forecasting, Elsevier, Elsevier, vol. 17(3), pages 499-515.
- Peter M. Summers, 1999. "Macroeconomic Forecasting at the Melbourne Institute," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 32(2), pages 197-205.
- Fisher, Lance A, 1996. "Sources of Exchange Rate and Price Level Fluctuations in Two Commodity Exporting Countries: Australia and New Zealand," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 72(219), pages 345-58, December.
- Herrera, Ana Maria & Hamilton, James D., 2001. "Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy," University of California at San Diego, Economics Working Paper Series, Department of Economics, UC San Diego qt4qp0p0v5, Department of Economics, UC San Diego.
- Jacqueline Dwyer & Kenneth Leong, 2001. "Changes in the Determinants of Inflation in Australia," RBA Research Discussion Papers, Reserve Bank of Australia rdp2001-02, Reserve Bank of Australia.
- Jacqueline Dwyer & Kenneth Leong, 2001. "Changes in the determinants of inflation in Australia," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 1-28 Bank for International Settlements.
- Mardi Dungey & Adrian Pagan, 2008.
"Extending an SVAR Model of the Australian Economy,"
NCER Working Paper Series, National Centre for Econometric Research
21, National Centre for Econometric Research.
- Mardi Dungey & Adrian Pagan, 2009. "Extending a SVAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 85(268), pages 1-20, 03.
- 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.
- Philip Liu, 2008. "The Role of International Shocks in Australiaâ€™s Business Cycle," RBA Research Discussion Papers, Reserve Bank of Australia rdp2008-08, Reserve Bank of Australia.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.