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An Estimated New Keynesian Policy Model for Australia

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  • DANIEL BUNCIC
  • MARTIN MELECKY

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. Copyright © 2008 The Economic Society of Australia.

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  • Daniel Buncic & Martin Melecky, 2008. "An Estimated New Keynesian Policy Model for Australia," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 1-16, March.
  • Handle: RePEc:bla:ecorec:v:84:y:2008:i:264:p:1-16
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    Cited by:

    1. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    2. repec:eee:ecmode:v:64:y:2017:i:c:p:153-171 is not listed on IDEAS
    3. Melecky, Ales & Melecky, Martin, 2008. "From Inflation to Exchange Rate Targeting: Estimating the Stabilization Effects," MPRA Paper 10844, University Library of Munich, Germany.
    4. Jarkko Jääskelä & Kristoffer Nimark, 2008. "A Medium-scale Open Economy Model of Australia," RBA Research Discussion Papers rdp2008-07, Reserve Bank of Australia.
    5. Daniel M. Rees & Penelope Smith & Jamie Hall, 2016. "A Multi-sector Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 92(298), pages 374-408, September.
    6. Buncic, Daniel & Melecky, Martin, 2013. "Macroprudential stress testing of credit risk: A practical approach for policy makers," Journal of Financial Stability, Elsevier, vol. 9(3), pages 347-370.
    7. Martin Melecky & Evgenij Najdov, 2010. "Comparing constraints to economic stabilization in Macedonia and Slovakia: macroestimates with micronarratives," Applied Financial Economics, Taylor & Francis Journals, vol. 20(9), pages 681-699.
    8. Georgiadis, Georgios & Jancokova, Martina, 2017. "Financial Globalisation, Monetary Policy Spillovers and Macro-modelling: Tales from 1001 Shocks," Globalization and Monetary Policy Institute Working Paper 314, Federal Reserve Bank of Dallas.
    9. Syed, Kanwar Abbas, 2009. "Do Money Or Oil And Crop Productivity Shocks Lead To Inflation: The Case Of Pakistan," MPRA Paper 15223, University Library of Munich, Germany.
    10. Melecky, Ales & Melecky, Martin, 2010. "From inflation to exchange rate targeting: Estimating the stabilization effects for a small open economy," Economic Systems, Elsevier, vol. 34(4), pages 450-468, December.
    11. Felipe Morandé L. & Mauricio Tejada G., 2009. "Persistent Supply Shocks: A Pain in the Neck for Central Banks?," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 12(3), pages 25-58, December.
    12. Buncic, Daniel & Lentner, Philipp, 2016. "The term structure of interest rates in an estimated New Keynesian policy model," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 126-150.
    13. Leu, Shawn Chen-Yu, 2011. "A New Keynesian SVAR model of the Australian economy," Economic Modelling, Elsevier, vol. 28(1-2), pages 157-168, January.
    14. Caraiani, Petre, 2008. "An Analysis Of Domestic And External Shocks On Romanian Economy Using A Dsge Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 5(3), pages 100-114, September.
    15. Eurilton Araújo & Débora Gouveia, 2013. "Calvo-type rules and the forward-looking behavior of inflation targeting central banks," Economics Bulletin, AccessEcon, vol. 33(3), pages 2042-2051.
    16. Buncic, Daniel & Melecky, Martin, 2014. "Equilibrium credit: The reference point for macroprudential supervisors," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 135-154.
    17. Jarkko P. Jääskelä & Kristoffer Nimark, 2011. "A Medium‐Scale New Keynesian Open Economy Model of Australia," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 11-36, March.
    18. Sheen, Jeffrey & Wang, Ben Zhe, 2016. "Assessing labor market frictions in a small open economy," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 231-251.
    19. de Silva, Ashton, 2008. "Forecasting macroeconomic variables using a structural state space model," MPRA Paper 11060, University Library of Munich, Germany.
    20. Melecky, Martin, 2009. "Macroeconomic Management, Financial Sector Development and Crisis Resilience: Some Stylized Facts from Central and Eastern Europe," MPRA Paper 28214, University Library of Munich, Germany, revised 15 Jan 2011.
    21. Mardi Dungey & Denise Osborn & Mala Raghavan, 2014. "International Transmissions to Australia: The Roles of the USA and Euro Area," The Economic Record, The Economic Society of Australia, vol. 90(291), pages 421-446, December.
    22. Harding, Don & Negara, Siwage, 2008. "Estimating baseline real business cycle models of the Australian economy," MPRA Paper 33556, University Library of Munich, Germany.
    23. Malikane, Christopher & Ojah, Kalu, 2014. "Fisher's Relation and the Term Structure: Implications for IS Curves," MPRA Paper 55553, University Library of Munich, Germany.
    24. Ara Stepanyan & Era Dabla-Norris & Ashot Anatolii Mkrtchyan, 2009. "A New Keynesian Model of the Armenian Economy," IMF Working Papers 09/66, International Monetary Fund.
    25. Ivan Kitov & Oleg Kitov, 2011. "The Australian Phillips curve and more," Papers 1102.1851, arXiv.org.

    More about this item

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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