We analyse the determinants of Australia’s exchange rate in terms of the approach introduced by Williamson (1983), based on the simultaneous attainment of internal and external balance. Internal balance implies that the economy is operating at its supply potential with no inflationary...

This paper applies a rational expectations model of the real exchange rate to Australian data. Specifically, it decomposes monthly movements in Australia’s real exchange rate into a transitory and a permanent component. The transitory component is identified with changes in the unobservable <em>ex...</em>

Australia’s manufactured exports have grown rapidly since the mid-1980s. The growth of Australia’s trading partners and the overall depreciation of the exchange rate, while important, do not fully explain this growth. This paper seeks to explain the remaining growth in reference to firms’...