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A Sectoral Model of the Australian Economy

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  • Jeremy Lawson

    (Reserve Bank of Australia)

  • Daniel Rees

    (Reserve Bank of Australia)

Abstract

We use a structural vector autoregression (SVAR) to examine the effect of unanticipated changes in monetary policy on the expenditure and production components of GDP over the period from 1983 to 2007. We find that dwelling investment and machinery & equipment investment are the most interest-sensitive expenditure components of activity, and that construction and retail trade are the most interest-sensitive production components of activity. We subject our model to a range of sensitivity checks and find that our results are robust to omitted variables, alternative identification schemes and the time period over which our model is estimated.

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Bibliographic Info

Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp2008-01.

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Date of creation: Apr 2008
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Handle: RePEc:rba:rbardp:rdp2008-01

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Keywords: Australian economy; sectoral macroeconomic model; monetary policy;

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References

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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the flow of funds," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
  2. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
  3. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
  4. Tomoya Suzuki, 2004. "Is the Lending Channel of Monetary Policy Dominant in Australia?," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 145-156, 06.
  5. Allan H. Meltzer, 1995. "Monetary, Credit and (Other) Transmission Processes: A Monetarist Perspective," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 49-72, Fall.
  6. Frederic S. Mishkin, 2007. "Housing and the Monetary Transmission Mechanism," NBER Working Papers 13518, National Bureau of Economic Research, Inc.
  7. Leon Berkelmans, 2005. "Credit and Monetary Policy: An Australian SVAR," RBA Research Discussion Papers rdp2005-06, Reserve Bank of Australia.
  8. Kristoffer Nimark, 2007. "A Structural Model of Australia as a Small Open Economy," RBA Research Discussion Papers rdp2007-01, Reserve Bank of Australia.
  9. Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
  10. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
  11. Ernst Juerg Weber, 2006. "Monetary policy in a heterogeneous monetary union: the Australian experience," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2487-2495.
  12. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September.
  13. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
  14. Frederic S. Mishkin, 1996. "The Channels of Monetary Transmission: Lessons for Monetary Policy," NBER Working Papers 5464, National Bureau of Economic Research, Inc.
  15. Dale, Spencer & Haldane, Andrew G., 1995. "Interest rates and the channels of monetary transmission: Some sectoral estimates," European Economic Review, Elsevier, vol. 39(9), pages 1611-1626, December.
  16. David O. Cushman & Tao Zha, 1995. "Identifying monetary policy in a small open economy under flexible exchange rates," Working Paper 95-7, Federal Reserve Bank of Atlanta.
  17. Andrea Brischetto & Graham Voss, 1999. "A Structural Vector Autoregression Model of Monetary Policy in Australia," RBA Research Discussion Papers rdp1999-11, Reserve Bank of Australia.
  18. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
  19. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
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Cited by:
  1. Mardi Dungey & Renee Fry-McKibbin & Verity Linehan, 2014. "Chinese resource demand and the natural resource supplier," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 167-178, January.
  2. Marion Kohler & Joseph Manalo & Dilhan Perera, 2014. "Exchange Rate Movements and Economic Activity," RBA Bulletin, Reserve Bank of Australia, pages 47-54, March.

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