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Supply Shocks and Net Exports: Some Evidence for Australia

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  • Scoggins, John F

Abstract

The theory of intertemporal substitution predicts that households will attempt to smooth the fluctuations in consumption caused by temporary supply shocks. This substitution leads to an increase in the short-term interest rate when temporary decreases in supply occur. Observing agricultural supply shocks, Dave Denslow and Mark Rush (1989) found evidence to support this theory in a closed economy (nineteenth century France). In an open economy, a temporary drop in agricultural output would decrease net exports rather than affect the interest rate. Evidence to support this theory is found using twentieth-century Australian data. Copyright 1993 by Ohio State University Press.

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  • Scoggins, John F, 1993. "Supply Shocks and Net Exports: Some Evidence for Australia," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 780-785, November.
    • Handle: RePEc:mcb:jmoncb:v:25:y:1993:i:4:p:780-85
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