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The Role of International Shocks in Australia’s Business Cycle

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  • Philip Liu

    (Reserve Bank of Australia)

Abstract

This paper examines the sources of Australia’s business cycle fluctuations. The cyclical component of GDP is extracted using the Beveridge-Nelson decomposition and a structural VAR model is identified using robust sign restrictions derived from a small open economy model. In contrast to previous VAR studies, international factors are found to contribute to over half of the output forecast errors, whereas demand shocks have relatively modest effects.

Suggested Citation

  • Philip Liu, 2008. "The Role of International Shocks in Australia’s Business Cycle," RBA Research Discussion Papers rdp2008-08, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2008-08
    as

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    File URL: https://www.rba.gov.au/publications/rdp/2008/pdf/rdp2008-08.pdf
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    References listed on IDEAS

    as
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    6. Gert Peersman & Roland Straub, 2009. "Technology Shocks And Robust Sign Restrictions In A Euro Area Svar," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 727-750, August.
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    13. 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.
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    More about this item

    Keywords

    Australian business cycle; sign restriction VAR; stabilisation policy; international shocks;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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