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A Small Model of the Australian Macroeconomy

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Author Info

  • Meredith Beechey

    (Reserve Bank of Australia)

  • Nargis Bharucha

    (Reserve Bank of Australia)

  • Adam Cagliarini

    (Reserve Bank of Australia)

  • David Gruen

    (Reserve Bank of Australia)

  • Christopher Thompson

    (Reserve Bank of Australia)

Abstract

This paper presents a small model of the Australian macroeconomy. The model is empirically based, aggregate in nature and consists of five estimated equations – for non-farm output, the real exchange rate, import prices, unit labour costs and consumer prices. The stylised facts underlying each equation are discussed and estimation results are presented. The model’s primary use is to examine macroeconomic developments over the short to medium term, although it also has a well-defined steady state in the longer run with appropriate theoretical properties. Dynamic responses of the model to monetary policy changes and selected shocks are illustrated in the paper.

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Bibliographic Info

Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2000-05.

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Date of creation: Jun 2000
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Handle: RePEc:rba:rbardp:rdp2000-05

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Keywords: Australian economy; macroeconomic model; monetary policy;

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References

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  1. Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February.
  2. Jeffrey C. Fuhrer, 1995. "The [un]importance of forward-looking behavior in price specifications," Working Papers 95-6, Federal Reserve Bank of Boston.
  3. Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
  4. Charles Engel, 1995. "The Forward Discount Anomaly and the Risk Premium: A Survey of Recent Evidence," NBER Working Papers 5312, National Bureau of Economic Research, Inc.
  5. Tro Kortian & James O’Regan, 1996. "Australian Financial Market Volatility: An Exploration of Cross-country and Cross-market Linkages," RBA Research Discussion Papers rdp9609, Reserve Bank of Australia.
  6. repec:fth:inseep:9645 is not listed on IDEAS
  7. Fama, Eugene F, 1990. " Stock Returns, Expected Returns, and Real Activity," Journal of Finance, American Finance Association, vol. 45(4), pages 1089-1108, September.
  8. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
  9. Adrian Blundell-Wignall & Robert G. Gregory, 1990. "Exchange Rate Policy in Advanced Commodity-Exporting Countries: The Case of Australia and New Zealand," OECD Economics Department Working Papers 83, OECD Publishing.
  10. David Gruen & Tro Kortian, 1996. "Why Does the Australian Dollar Move so Closely with the Terms of Trade?," RBA Research Discussion Papers rdp9601, Reserve Bank of Australia.
  11. Nicolas de Roos & Bill Russell, 1996. "Towards an Understanding of Australia’s Co-movement with Foreign Business Cycles," RBA Research Discussion Papers rdp9607, Reserve Bank of Australia.
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