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An Estimated Small Open Economy New-Keynesian Model of the Australian Economy

  • Heidari, Hassan

    ()

    (Department of Economics, Urmia University, P.O.Box 165, Urmia, Iran)

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    This paper estimates a small open economy New-Keynesian model using data from Australia and the US economy with Full Information Maximum Likelihood method. Our estimated US structural parameters are in line with those of Giordani (2004) on Canadian data. For Australian parameters we find that the real exchange rate has little effect on output gap and inflation, whereas the foreign output gap has a significant effect on both of them. Moreover, our results show a prominent role for backwardlooking behaviour for Australian inflation.

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    File URL: http://www.ipe.ro/rjef/rjef4_10/rjef4_10_1.pdf
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    Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

    Volume (Year): (2010)
    Issue (Month): 4 (December)
    Pages: 7-15

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    Handle: RePEc:rjr:romjef:v::y:2010:i:4:p:7-15
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    1. Richard Clarida & Jordi Gali & Mark Gertler, 2001. "Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach," American Economic Review, American Economic Association, vol. 91(2), pages 248-252, May.
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    8. Batini, Nicoletta & Jackson, Brian & Nickell, Stephen, 2005. "An open-economy new Keynesian Phillips curve for the U.K," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1061-1071, September.
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    16. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
    17. Kurmann, Andre, 2005. "Quantifying the uncertainty about the fit of a new Keynesian pricing model," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1119-1134, September.
    18. Jeffery D. Amato & Thomas Laubach, 1999. "The value of interest rate smoothing : how the private sector helps the Federal Reserve," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 47-64.
    19. Meredith Beechey & Nargis Bharucha & Adam Cagliarini & David Gruen & Christopher Thompson, 2000. "A Small Model of the Australian Macroeconomy," RBA Research Discussion Papers rdp2000-05, Reserve Bank of Australia.
    20. Summers, Peter M., 2001. "Forecasting Australia's economic performance during the Asian crisis," International Journal of Forecasting, Elsevier, vol. 17(3), pages 499-515.
    21. Söderlind, Paul, 1998. "Solution and Estimation of RE Macromodels with Optimal Policy," SSE/EFI Working Paper Series in Economics and Finance 256, Stockholm School of Economics.
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