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How well does the Mundell-Fleming model fit Australian data since the collapse of Bretton Woods?

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  • Hyeon-Seung Huh

Abstract

Australian time series for the nominal interest rate, real output, the nominal exchange rate, prices and nominal money since 1973 are characterized by a vector autoregressive process driven by five exogenous disturbances. Those disturbances are identified so that they can be interpreted as the five main sources of fluctuations found in the Mundell - Fleming model of a small open economy under flexible exchange rates, namely: world interest rate, aggregate supply, IS, money supply and money demand shocks. The dynamic responses of the estimated model to the structural shocks are analysed and shown to match most of the predictions of the Mundell - Fleming model.

Suggested Citation

  • Hyeon-Seung Huh, 1999. "How well does the Mundell-Fleming model fit Australian data since the collapse of Bretton Woods?," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 397-407.
  • Handle: RePEc:taf:applec:v:31:y:1999:i:3:p:397-407
    DOI: 10.1080/000368499324372
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    Citations

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    Cited by:

    1. Shawn Chen-Yu Leu, 2006. "A New Keynesian Perspective of Monetary Policy in Australia," Working Papers 2006.01, School of Economics, La Trobe University.
    2. Robert A Buckle & Kunhong Kim & Heather Kirkham & Nathan McLellan & Jared Sharma, 2002. "A structural VAR model of the New Zealand business cycle," Treasury Working Paper Series 02/26, New Zealand Treasury.
    3. Ernst Juerg Weber, 2006. "Monetary policy in a heterogeneous monetary union: the Australian experience," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2487-2495.
    4. Leu, Shawn Chen-Yu, 2011. "A New Keynesian SVAR model of the Australian economy," Economic Modelling, Elsevier, vol. 28(1), pages 157-168.
    5. 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.
    6. Wei Sun, "undated". "Why Do Floating Exchange Rates Float? Evidence From Capital Flows in a Structural VAR Model," EcoMod2006 272100092, EcoMod.
    7. Leu, Shawn, 2004. "A New Keynesian Perspective of Monetary Policy Implementation in Austr alia," Working Papers 1, University of Sydney, School of Economics.
    8. Andrea Brischetto & Graham Voss, 1999. "A Structural Vector Autoregression Model of Monetary Policy in Australia," RBA Research Discussion Papers rdp1999-11, Reserve Bank of Australia.
    9. Meng, Xiangcai & Huang, Chia-Hsing, 2016. "Nonlinear models for the sources of real effective exchange rate fluctuations: Evidence from the Republic of Korea," Japan and the World Economy, Elsevier, vol. 40(C), pages 21-30.
    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. Yu Hsing, 2006. "Analysis of Short-term Exchange Rate Movements in Korea: Application of an Extended Mundell-Fleming Model," Global Economic Review, Taylor & Francis Journals, vol. 35(2), pages 145-151.

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