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Extending a SVAR Model of the Australian Economy

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  • MARDI DUNGEY
  • ADRIAN PAGAN

Abstract

Dungey and Pagan (2000) present a SVAR model of the Australian economy which models macroeconomic outcomes as transitory deviations from a deterministic trend. In this paper we extend that model in two directions. First, we relate it to an emerging literature on Dynamic Stochastic General Equilibrium modelling of small open economies. Second, we allow for both transitory and permanent components in the series and show how this modification has an impact on the design of macroeconomic models. Copyright © 2009 The Economic Society of Australia.

Suggested Citation

  • Mardi Dungey & Adrian Pagan, 2009. "Extending a SVAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 85(268), pages 1-20, March.
  • Handle: RePEc:bla:ecorec:v:85:y:2009:i:268:p:1-20
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    1. Jordi Galí, 1992. "How Well Does The IS-LM Model Fit Postwar U. S. Data?," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 709-738.
    2. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    3. Paolo Giordani, 2004. "Evaluating New-Keynesian Models of a Small Open Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(s1), pages 713-733, September.
    4. Leon Berkelmans, 2005. "Credit and Monetary Policy: An Australian SVAR," RBA Research Discussion Papers rdp2005-06, Reserve Bank of Australia.
    5. Jordi Gali, 1999. "Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations?," American Economic Review, American Economic Association, vol. 89(1), pages 249-271, March.
    6. Mardi Dungey, 2002. "International Shocks and the Role of Domestic Policy in Australia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 5(2), pages 143-163, June.
    7. GORDON de BROUWER & JAMES GILBERT, 2005. "Monetary Policy Reaction Functions in Australia," The Economic Record, The Economic Society of Australia, vol. 81(253), pages 124-134, June.
    8. Lubik, Thomas A. & Schorfheide, Frank, 2007. "Do central banks respond to exchange rate movements? A structural investigation," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1069-1087, May.
    9. Svensson, Lars E. O., 2000. "Open-economy inflation targeting," Journal of International Economics, Elsevier, vol. 50(1), pages 155-183, February.
    10. Dungey, Mardi & Pagan, Adrian, 2000. "A Structural VAR Model of the Australian Economy," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 321-342, December.
    11. Edge, Rochelle M. & Kiley, Michael T. & Laforte, Jean-Philippe, 2008. "Natural rate measures in an estimated DSGE model of the U.S. economy," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2512-2535, August.
    12. Douglas Laxton & Andrew Berg & Philippe D Karam, 2006. "Practical Model-Based Monetary Policy Analysis; A How-To Guide," IMF Working Papers 06/81, International Monetary Fund.
    13. Martin Fukac & Adrian Pagan, 2006. "Limited Information Estimation and Evaluation of DSGE Models. Working paper #6," NCER Working Paper Series 6, National Centre for Econometric Research.
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    Cited by:

    1. Edda Claus & Mardi Dungey & Renée Fry, 2008. "Monetary Policy in Illiquid Markets: Options for a Small Open Economy," Open Economies Review, Springer, vol. 19(3), pages 305-336, July.
    2. Manalo, Josef & Perera, Dilhan & Rees, Daniel M., 2015. "Exchange rate movements and the Australian economy," Economic Modelling, Elsevier, vol. 47(C), pages 53-62.
    3. David Jacobs & Vanessa Rayner, 2012. "The Role of Credit Supply in the Australian Economy," RBA Research Discussion Papers rdp2012-02, Reserve Bank of Australia.
    4. 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.
    5. 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.
    6. Philip Liu, 2010. "The Effects of International Shocks on Australia's Business Cycle," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 486-503, December.
    7. Afrin, Sadia, 2017. "Monetary policy transmission in Bangladesh: Exploring the lending channel," Journal of Asian Economics, Elsevier, vol. 49(C), pages 60-80.
    8. Mardi Dungey & M.Tugrul Vehbi, 2011. "A SVECM Model of the UK Economy and The Term Premium," CAMA Working Papers 2011-26, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    9. Renée A. Fry & Vance L. Martin & Nicholas Voukelatos, 2010. "Overvaluation in Australian Housing and Equity Markets: Wealth Effects or Monetary Policy?," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 465-485, December.
    10. Jarkko Jääskelä & Penelope Smith, 2011. "Terms of Trade Shocks: What are They and What Do They Do?," RBA Research Discussion Papers rdp2011-05, Reserve Bank of Australia.
    11. Knop, Stephen J. & Vespignani, Joaquin L., 2014. "The sectorial impact of commodity price shocks in Australia," Economic Modelling, Elsevier, vol. 42(C), pages 257-271.
    12. Shengzu Wang & Patrizia Tumbarello, 2010. "What Drives House Prices in Australia? A+L4584 Cross-Country Approach," IMF Working Papers 10/291, International Monetary Fund.
    13. Sin, Chor-yiu (CY), 2015. "The economic fundamental and economic policy uncertainty of Mainland China and their impacts on Taiwan and Hong Kong," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 298-311.
    14. Dungey, Mardi & Vehbi, Tugrul, 2015. "The influences of international output shocks from the US and China on ASEAN economies," Journal of Asian Economics, Elsevier, vol. 39(C), pages 59-71.
    15. Andrej Sokol & Ambrogio Cesa-Bianchi, 2017. "The International Credit Channel of U.S. Monetary Policy and Financial Shocks," 2017 Meeting Papers 724, Society for Economic Dynamics.
    16. Vespignani, Joaquin L., 2015. "On the differential impact of monetary policy across states/territories and its determinants in Australia: Evidence and new methodology from a small open economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 1-13.
    17. Mardi Dungey & Denise Osborn, 2009. "Modelling International Linkages for Large Open Economies: US and Euro Area," CAMA Working Papers 2009-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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