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Australian Economic Growth: Non-Linearities and Internaitonal Influences

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Abstract

This paper considers the extent to which fluctuations in Australian economic growth are affected by domestic and overseas economic performance. We investigate the performance of a range of non-linear models versus linear models using Bayes factors and posterior odds ratios. The posterior odds ratios favour non-linear specifications in which fluctuations in economic activity in the US affect Australia's economic performance. Our results suggest that an exogenous negative shock will be more persistent, lead to greater output volatility, and have a greater impact on growth, than a positive shock of equal magnitude.

Suggested Citation

  • Henry, O.T. & Summers, P.M., 2000. "Australian Economic Growth: Non-Linearities and Internaitonal Influences," Department of Economics - Working Papers Series 738, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:738
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    File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-00-01/738.pdf
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    References listed on IDEAS

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    1. Koop, Gary & Potter, Simon M, 1999. "Dynamic Asymmetries in U.S. Unemployment," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(3), pages 298-312, July.
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    3. Potter, Simon M, 1995. "A Nonlinear Approach to US GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 109-125, April-Jun.
    4. David Gruen & Geoffrey Shuetrim, 1994. "Internationalisation and the Macroeconomy," RBA Annual Conference Volume,in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia.
    5. Henry, Olan T & Olekalns, Nilss & Summers, Peter M, 2001. "Exchange Rate Instability: A Threshold Autoregressive Approach," The Economic Record, The Economic Society of Australia, vol. 77(237), pages 160-166, June.
    6. Brooks, Chris & Henry, Olan T., 2000. "Linear and non-linear transmission of equity return volatility: evidence from the US, Japan and Australia," Economic Modelling, Elsevier, vol. 17(4), pages 497-513, December.
    7. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
    8. Adrian Pagan, 1997. "Towards an Understanding of Some Business Cycle Characteristics," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(1), pages 1-15.
    9. Koop, Gary & Potter, Simon M., 1998. "Bayes factors and nonlinearity: Evidence from economic time series1," Journal of Econometrics, Elsevier, vol. 88(2), pages 251-281, November.
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    Keywords

    ECONOMIC GROWTH ; BUSINESS CYCLES ; INTERNATIONAL ECONOMY;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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