Paper #1211

Title:

A structural model of Australia as a small open economy

Author:

Kristoffer Nimark

Date:

March 2009

Abstract:

This paper sets up and estimates a structural model of Australia as a small open economy using Bayesian techniques. Unlike other recent studies, the paper shows that a small microfounded model can capture the open economy dimensions quite well. Specifically, the model attributes a substantial fraction of the volatility of domestic output and inflation to foreign disturbances, close to what is suggested by unrestricted VAR studies. The paper also investigates the effects of various exogenous shocks on the Australian economy.

Area of Research:

Macroeconomics and International Economics

Published in:

Australian Economic Review, 42 (1), pp. 24-41.

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