IDEAS home Printed from
   My bibliography  Save this paper

Export Price Volatility in Australia: An Application of ARCH and GARCH Models




Australia has one of the more volatile set of export prices among OECD countries. This paper examines the extent to which Australia's export prices relate to the world prices using quarterly time-series data spanning the period 1969q4-2002q3. The empirical results based on dynamic least squares method show that Australia's export prices are cointegrated with the global export prices. A short-term dynamic ARCH-in Mean model, which captures the time varying nature of price volatility, has been used to explain the growth rate of Australia's export prices. It is found that (a) changes in Australia's export prices are highly associated with systematic changes in world export prices; (b) the diversification of Australia's export base has contributed to a significant reduction in the volatility of export prices during the study period; and (c) the time varying volatility has not undermined, in a significant manner, the growth rate of Australia's export prices.

Suggested Citation

  • Valadkhani, Abbas & Layton, Allan P. & Karunaratne, Neil D., 2005. "Export Price Volatility in Australia: An Application of ARCH and GARCH Models," Economics Working Papers wp05-11, School of Economics, University of Wollongong, NSW, Australia.
  • Handle: RePEc:uow:depec1:wp05-11

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Fisher, Lance A, 1996. "Sources of Exchange Rate and Price Level Fluctuations in Two Commodity Exporting Countries: Australia and New Zealand," The Economic Record, The Economic Society of Australia, vol. 72(219), pages 345-358, December.
    2. Harvie, Charles & van Hoa, Tran, 1993. "Long-term relationships of major macro-variables in a resource-related economic model of Australia : A cointegration analysis," Energy Economics, Elsevier, vol. 15(4), pages 257-261, October.
    3. 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.
    4. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    5. Martin Lettau, 2001. "Consumption, Aggregate Wealth, and Expected Stock Returns," Journal of Finance, American Finance Association, vol. 56(3), pages 815-849, June.
    6. David Gruen & Tro Kortian, 1996. "Why Does the Australian Dollar Move so Closely with the Terms of Trade?," RBA Research Discussion Papers rdp9601, Reserve Bank of Australia.
    7. Paul Cashin & C. McDermott, 2002. "Terms of Trade Shocks and the Current Account: Evidence from Five Industrial Countries," Open Economies Review, Springer, vol. 13(3), pages 219-235, July.
    8. David Gruen & Jacqueline Dwyer, 1996. "Are Terms of Trade Rises Inflationary?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(2), pages 211-224.
    9. Harvie, Charles & Van Hoa, Tran, 1994. "Terms of trade shocks and macroeconomic adjustment in a resource exporting economy : The case of Australia," Resources Policy, Elsevier, vol. 20(2), pages 101-112, June.
    10. Doug McTaggart & Colin Rogers, 1990. "Monetary Policy and the Terms of Trade: A Case for Monetary Base Control in Australia?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 23(2), pages 38-49.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Export price volatility; Australia; ARCH models; GARCH models;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uow:depec1:wp05-11. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Siminski). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.