26 Pages Posted: 14 Mar 2011
Date Written: February 20, 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.
JEL Classification: C11, E40, E52
Suggested Citation: 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
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