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...

Under the direction of the Asian Consultative Council of the BIS at its February 2019 meeting, the BIS Representative Office for Asia and the Pacific set up a Working Group of regional central banks to examine their policy frameworks, focusing on capital flows, exchange rates, and the joint use...

This paper presents some theory and evidence on the implications of sudden currency depreciations for output and inflation. It identifies some of the characteristics shared by countries which have suffered falling output in the aftermath of a currency crisis, and it presents a small model which...

Obstfeld and Rogoff (2001) argue that trade costs provide at least part of the explanation for a number of puzzles in international macroeconomics. Using data on imports to the United States from developed economies, this paper investigates whether trade costs are associated with correlations...

Recent macroeconomic experience has drawn attention to the importance of interdependence among countries through financial markets and institutions, independently of traditional trade linkages. This paper develops a model of the international transmission of shocks due to interdependent...

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...

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...

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...