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The Effects of International Shocks on Australia's Business Cycle

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  • PHILIP LIU

Abstract

This article examines the sources of Australia's business cycle fluctuations. The cyclical component of gross domestic product is extracted using the Beveridge–Nelson decomposition and a structural Vector autoregressive model (VAR) model is identified using robust sign restrictions derived from a structural small open economy model. In contrast to previous VAR studies, international factors are found to contribute to over half of the output forecast errors whereas demand shocks have relatively modest effects.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:ecorec:v:86:y:2010:i:275:p:486-503
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    File URL: http://hdl.handle.net/10.1111/j.1475-4932.2010.00637.x
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Duncan, Roberto, 2014. "Institutional quality, the cyclicality of monetary policy and macroeconomic volatility," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 113-155.
    2. Jarkko P. Jääskelä & Penelope Smith, 2013. "Terms of Trade Shocks: What Are They and What Do They Do?," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 145-159, June.
    3. Fisher, Lance A. & Huh, Hyeon-seung, 2016. "Monetary policy and exchange rates: Further evidence using a new method for implementing sign restrictions," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 177-191.
    4. 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.
    5. Yan M Sun, 2011. "From West to East; Estimating External Spillovers to Australia and New Zealand," IMF Working Papers 11/120, International Monetary Fund.

    More about this item

    Keywords

    E32 ; E52 ; E63 ; F41 ;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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