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Output Composition of the Monetary Policy Transmission Mechanism: Is Australia Different?

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  • Tuan Phan

Abstract

This paper compares the output composition of the monetary policy transmission mechanism in Australia to those for the Euro area and the United States. Four Vector Autoregressive (VAR) models are used to estimate the contributions of private consumption and investment to output reactions resulting from nominal interest rate shocks for the period 1982Q3–2007Q4. The results suggest that the investment channel plays a more important role than the consumption channel in Australia, while the contributions of the two channels are indistinguishable in the Euro area and the U.S. The difference between Australia and the Euro area comes from differences in housing investment responses, whereas Australia is different to the U.S. mainly because it has a lower share of household consumption in total demand.

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File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2014-05/39_2014_phan.pdf
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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2014-39.

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Length: 27 pages
Date of creation: May 2014
Date of revision:
Handle: RePEc:een:camaaa:2014-39

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Keywords: output composition; monetary policy transmission mechanism; interest rate; housing investment; durable consumption;

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