External Influences on Output: An Industry Analysis
AbstractThe correlation of Australian output with that of the OECD, and the United States in particular, has been well documented. This paper explores foreign linkages by looking at the production side of the national accounts for Australia and the United States, which is often characterised as the country at the technological frontier. Industrial structures in the two countries are broadly similar, and about two-thirds of Australian output is found to be linked to that of the United States. The US links in the agricultural and mining sectors seem to be related to aggregate demand in the United States, in both the short and long run. But in manufacturing – and notably in goods for which production is technology intensive and changing over time – there are persistent, long-run links with the corresponding sector in the United States. Combined with other evidence, the conjecture is that the US links in manufacturing are driven by the supply-side: technological change, innovation and new products are transmitted from the United States and elsewhere to Australia, mostly within two to three years. Domestic demand seems to dominate service sectors, although US aggregate demand can be relevant, as, for example, in the finance and property sector. While links with the United States are pervasive, domestic events and policies are shown to be important to economic outcomes, particularly in the short to medium term.
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Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9612.
Date of creation: Dec 1996
Date of revision:
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
- O56 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Oceania
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