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A Medium-Scale New Keynesian Open Economy Model of Australia

Author

Listed:
  • Jarkko P. Jääskelä
  • Kristoffer P. Nimark

Abstract

We estimate a new Keynesian open economy dynamic stochastic general equilibrium model of Australia with a large number of shocks, frictions and rigidities, matching a large number of observable time series. We find that both foreign and domestic shocks are important drivers of the Australian business cycle. We also find that the initial impact on inflation of an increase in demand for Australian commodities is negative, because of an improvement in the real exchange rate, although there is a persistent positive effect on inflation that dominates at longer horizons.

Suggested Citation

  • Jarkko P. Jääskelä & Kristoffer P. Nimark, 2015. "A Medium-Scale New Keynesian Open Economy Model of Australia," Working Papers 588, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:588
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    References listed on IDEAS

    as
    1. Kristoffer P. Nimark, 2009. "A Structural Model of Australia as a Small Open Economy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(1), pages 24-41, March.
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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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