Paper #1210

Title:

A medium-scale open economy model of Australia

Authors:

Kristoffer Nimark and Jarkko Jääskelä

Date:

December 2008

Abstract:

We estimate an open economy dynamic stochastic general equilibrium (DSGE) model of Australia with a 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, due to an improvement in the real exchange rate, though there is a persistent positive effect on inflation that dominates at longer horizons.

Keywords:

monetary policy.

JEL codes:

C11, E40, E52

Area of Research:

Macroeconomics and International Economics

Published in:

Economic Record, vol. 87 (276), 11-36, March 2011
With the title:
A medium-scale new Keynesian open economy model of Australia

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