Export Price Volatility in Australia: An Application of ARCH and GARCH Models
AbstractAustralia has one of the more volatile set of export prices among OECD countries. This paper examines the extent to which Australia's export prices relate to the world prices using quarterly time-series data spanning the period 1969q4-2002q3. The empirical results based on dynamic least squares method show that Australia's export prices are cointegrated with the global export prices. A short-term dynamic ARCH-in Mean model, which captures the time varying nature of price volatility, has been used to explain the growth rate of Australia's export prices. It is found that (a) changes in Australia's export prices are highly associated with systematic changes in world export prices; (b) the diversification of Australia's export base has contributed to a significant reduction in the volatility of export prices during the study period; and (c) the time varying volatility has not undermined, in a significant manner, the growth rate of Australia's export prices.
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Bibliographic InfoPaper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp05-11.
Length: 15 pages
Date of creation: 2005
Date of revision:
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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Export price volatility; Australia; ARCH models; GARCH models;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-11-09 (All new papers)
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