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A Medium-Scale New Keynesian Open Economy Model of Australia

26 Pages Posted: 14 Mar 2011  

Jarkko P. Jskel

affiliation not provided to SSRN

Kristoffer P. Nimark

Universitat Pompeu Fabra

Date Written: February 20, 2011

Abstract

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.

JEL Classification: C11, E40, E52

Suggested Citation

Jskel, Jarkko P. and Nimark, Kristoffer P., A Medium-Scale New Keynesian Open Economy Model of Australia (February 20, 2011). Economic Record, Vol. 87, Issue 276, pp. 11-36, 2011. Available at SSRN: https://ssrn.com/abstract=1782486 or http://dx.doi.org/10.1111/j.1475-4932.2010.00688.x

Jarkko P. Jskel (Contact Author)

affiliation not provided to SSRN

No Address Available

Kristoffer P. Nimark

Universitat Pompeu Fabra ( email )

Ramon Trias Fargas, 25-27
Barcelona, E-08005
Spain

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