The Australian economy has proven resilient to sizable exchange rate fluctuations over the post-float period. In part this can be attributed to financial institutions and non-financial firms learning to adapt to swings in the Australian dollar. This has included the increased use of financial...

We use a structural vector autoregression model to characterise the aggregate and industry effects of exchange rate movements on the Australian economy. We find that a temporary 10 per cent appreciation of the real exchange rate that is unrelated to the terms of trade or interest rate...

The correlation of Australian output with that of the OECD, and the United States in particular, has been well documented. This paper explores foreign linkages by looking at the production side of the national accounts for Australia and the United States, which is often characterised as the...

This paper investigates the merits of aggregate inflation targeting compared with non-traded inflation targeting using a model of a small open economy producing traded and non-traded goods. An important innovation of our approach is that we isolate the effects of exchange rate, supply and demand...

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...

Standard trade theory suggests that internationalisation of an economy should lead to increased competitive pressures and an improvement in the efficiency with which domestic goods are produced and priced. We examine a number of ways in which the pricing behaviour of the Australian manufacturing...

Since the late 1990s there have been substantial changes in the current account balances of a number of economies, most notably a marked widening in the current account deficit of the United States and increased net lending by many developing nations to developed economies. This paper uses panel...

This paper demonstrates that the response of the current account to shocks depends on the degree of persistence of these shocks. This result is in accordance with standard intertemporal models that incorporate both consumption smoothing and an investment response to shocks. The estimation...

The large recent US current account deficits have been the subject of an enormous amount of study in academia, among government and central bank economists, in business economic reports, and in the press. Many different explanations of the cause of the deficit have been offered, and to varying...

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 micro-founded model can capture the open economy dimensions quite well. Specifically, the model attributes a substantial...