A Medium-Scale New Keynesian Open Economy Model of Australia
Jarkko P. Jskel
affiliation not provided to SSRN
Kristoffer P. Nimark
Universitat Pompeu Fabra
February 20, 2011
Economic Record, Vol. 87, Issue 276, pp. 11-36, 2011
We estimate a new Keynesian open economy dynamic stochastic general equilibrium model of Australia with a large number of shocks, frictions and rigidities, matching a large number of observable time series. We find that both foreign and domestic shocks are important drivers of the Australian business cycle. We also find that the initial impact on inflation of an increase in demand for Australian commodities is negative, because of an improvement in the real exchange rate, although there is a persistent positive effect on inflation that dominates at longer horizons.
Number of Pages in PDF File: 26
JEL Classification: C11, E40, E52
Date posted: March 14, 2011
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