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The industrial impact of monetary shocks during the inflation targeting era in Australia

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  • Vespignani, Joaquin L.

Abstract

In this article we analyse the industrial impact of monetary shocks since inflation targeting has been introduced in Australia (1990). These impacts are quantified by constructing a structural vector autoregressive (SVAR) model for a small open economy. Our results show that construction and manufacturing industries exhibit a significant reduction in gross value added (GVA) after an unanticipated rise in the official cash rate. However, the finance and insurance industry, and the mining industry,seem to be unaffected by these shocks.

Suggested Citation

  • Vespignani, Joaquin L., 2012. "The industrial impact of monetary shocks during the inflation targeting era in Australia," MPRA Paper 43686, University Library of Munich, Germany, revised 01 Jan 2013.
  • Handle: RePEc:pra:mprapa:43686
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    References listed on IDEAS

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    1. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-921, September.
    2. Mark Gertler & R. Glenn Hubbard, 1988. "Financial factors in business fluctuations," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 33-78.
    3. George Georgopoulos, 2009. "Measuring regional effects of monetary policy in Canada," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2093-2113.
    4. Dedola, Luca & Lippi, Francesco, 2005. "The monetary transmission mechanism: Evidence from the industries of five OECD countries," European Economic Review, Elsevier, vol. 49(6), pages 1543-1569, August.
    5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    6. Joe Ganley & Chris Salmon, 1997. "The Industrial Impact of Monetary Policy Shocks: Some Stylised Facts," Bank of England working papers 68, Bank of England.
    7. 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.
    8. Leon Berkelmans, 2005. "Credit and Monetary Policy: An Australian SVAR," RBA Research Discussion Papers rdp2005-06, Reserve Bank of Australia.
    9. Gerald A. Carlino & Robert H. DeFina, 1999. "Do states respond differently to changes in monetary policy?," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 17-27.
    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. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
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    Cited by:

    1. Mardi Dungey & Renee Fry-McKibbin & Verity Linehan, 2014. "Chinese resource demand and the natural resource supplier," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 167-178, January.
    2. Manalo, Josef & Perera, Dilhan & Rees, Daniel M., 2015. "Exchange rate movements and the Australian economy," Economic Modelling, Elsevier, vol. 47(C), pages 53-62.
    3. Knop, Stephen J. & Vespignani, Joaquin L., 2014. "The sectorial impact of commodity price shocks in Australia," Economic Modelling, Elsevier, vol. 42(C), pages 257-271.

    More about this item

    Keywords

    Monetary shocks; Industrial response; Industrial composition and VAR model;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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