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Understanding the appreciation of the Australian dollar and its policy implications

Author

Listed:
  • Phil Garton

    (Treasury, Government of Australia)

  • Danial Gaudry

    (Treasury, Government of Australia)

  • Rhett Wilcox

    (Treasury, Government of Australia)

Abstract

The Australian dollar has appreciated strongly over the past decade, leading to increased concerns over the impacts of the high exchange rate on trade-exposed sectors of the economy. This paper examines the underlying drivers of this rise, the exchange rate’s role as a macroeconomic shock absorber and the implications of various policy options that might be directed at reducing the exchange rate.

Suggested Citation

  • Phil Garton & Danial Gaudry & Rhett Wilcox, 2012. "Understanding the appreciation of the Australian dollar and its policy implications," Economic Roundup, The Treasury, Australian Government, issue 2, pages 39-61, August.
  • Handle: RePEc:tsy:journl:journl_tsy_er_2012_2_3
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    File URL: http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2012/Economic%20Roundup%20Issue%202/Downloads/03_Appreciation_of_the_Aust_dollar.ashx
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    References listed on IDEAS

    as
    1. Phil Garton, 2012. "Sovereign wealth funds and the exchange rate: comparing resource booms in Australia, Chile and Norway," Economic Roundup, The Treasury, Australian Government, issue 2, pages 19-38, August.
    2. Gruen, David W R & Wilkinson, Jenny, 1994. "Australia's Real Exchange Rate--Is It Explained by the Terms of Trade or by Real Interest Differentials?," The Economic Record, The Economic Society of Australia, vol. 70(209), pages 204-219, June.
    3. Angelo Ranaldo & Paul Söderlind, 2010. "Safe Haven Currencies," Review of Finance, European Finance Association, vol. 14(3), pages 385-407.
    4. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
    5. Dominguez, Kathryn M & Frankel, Jeffrey A, 1993. "Does Foreign-Exchange Intervention Matter? The Portfolio Effect," American Economic Review, American Economic Association, vol. 83(5), pages 1356-1369, December.
    6. Henry, Olan T. & Olekalns, Nilss, 2002. "Does the Australian dollar real exchange rate display mean reversion," Journal of International Money and Finance, Elsevier, vol. 21(5), pages 651-666, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Yu Hsing, 2015. "Determinants of the AUD/USD Exchange Rate and Policy Implications," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(2), pages 326-332, February.

    More about this item

    Keywords

    trade-exposed industries; real exchange rates;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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