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An estimated New Keynesian policy model for Australia

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  • Buncic, Daniel
  • Melecky, Martin

Abstract

An open economy New Keynesian policy model for Australia is estimated in this study. We investigate how important external shocks are as a source of macroeconomic fluctuations when compared to domestic ones. The results of our analysis suggest that the Australian business cycle and domestic inflation are most affected by domestic demand and supply shocks, respectively. However, domestic output also appears to be strongly affected by foreign demand shocks, and domestic inflation by exchange rate shocks. Domestic variables do not seem to be significantly affected by foreign supply and monetary policy shocks.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4138.

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Date of creation: 18 Jul 2007
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Handle: RePEc:pra:mprapa:4138

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Keywords: New Keynesian Policy Modelling; Small Open Economy Model; Australia; US; Bayesian Estimation;

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