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A structural model of Australia as a small open economy

  • Kristoffer Nimark

This paper sets up and estimates a structural model of Australia as a small open economy using Bayesian techniques. Unlike other recent studies, the paper shows that a small microfounded model can capture the open economy dimensions quite well. Specifically, the model attributes a substantial fraction of the volatility of domestic output and inflation to foreign disturbances, close to what is suggested by unrestricted VAR studies. The paper also investigates the effects of various exogenous shocks on the Australian economy.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1211.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1211.

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Date of creation: Mar 2009
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Handle: RePEc:upf:upfgen:1211
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. Timothy Kam & Kirdan Lees & Philip Liu, 2006. "Uncovering The Hit-List For Small Inflation Targeters: A Bayesian Structural Analysis," CAMA Working Papers 2006-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Thomas Lubik & Frank Schorfheide, 2003. "Do Central Banks Respond to Exchange Rate Movements? A Structural Investigation," Economics Working Paper Archive 505, The Johns Hopkins University,Department of Economics.
  3. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  4. Alejandro Justiniano & Bruce Preston, 2009. "Can structural small open economy models account for the influence of foreign disturbances?," Working Paper Series WP-09-19, Federal Reserve Bank of Chicago.
  5. Giancarlo Corsetti & Paolo Pesenti, 2009. "The Simple Geometry of Transmission and Stabilization in Closed and Open Economies," NBER Chapters, in: NBER International Seminar on Macroeconomics 2007, pages 65-116 National Bureau of Economic Research, Inc.
  6. Leon Berkelmans, 2005. "Credit and Monetary Policy: An Australian SVAR," RBA Research Discussion Papers rdp2005-06, Reserve Bank of Australia.
  7. Frank Smets & Raf Wouters, 2004. "Forecasting with a Bayesian DSGE Model: an application to the euro area," Working Paper Research 60, National Bank of Belgium.
  8. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
  9. Álvarez, L. & Dhyne, E. & Hoeberichts, M. & Kwapil, C. & Le Bihan, H. & Lünnemann, P. & Martins, F. & Sabbatini, R. & Stahl,H. & Vermeulen, P. & Vilmunen, J., 2005. "Sticky Prices in the Euro Area: A Summary of New Micro Evidence," Working papers 138, Banque de France.
  10. Pierpaolo Benigno, 2008. "Price stability with imperfect financial integration," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  11. Marc P. Giannoni & Jean Boivin, 2005. "DSGE Models in a Data-Rich Environment," Computing in Economics and Finance 2005 431, Society for Computational Economics.
  12. Michael Woodford, 2001. "Imperfect Common Knowledge and the Effects of Monetary Policy," NBER Working Papers 8673, National Bureau of Economic Research, Inc.
  13. 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 321-42, December.
  14. Philippe Bacchetta & Eric Van Wincoop, 2006. "Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?," American Economic Review, American Economic Association, vol. 96(3), pages 552-576, June.
  15. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
  16. Thomas Lubik & Frank Schorfheide, 2005. "A Bayesian Look at New Open Economy Macroeconomics," Economics Working Paper Archive 521, The Johns Hopkins University,Department of Economics.
  17. Söderlind, Paul, 1998. "Solution and Estimation of RE Macromodels with Optimal Policy," SSE/EFI Working Paper Series in Economics and Finance 256, Stockholm School of Economics.
  18. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 707-734.
  19. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  20. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
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