A Structural Model of Australia as a Small Open Economy

Kristoffer Nimark ()

RBA Research Discussion Papers from Reserve Bank of Australia

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 micro-founded 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 and matches the evidence from reduced-form studies. In addition, the model relies much less than other estimated models on a persistent shock to the risk premium to explain changes in the nominal exchange rate. The paper also investigates the effects of various exogenous shocks on the Australian economy.

Keywords: small open economy; Australia; Bayesian methods (search for similar items in EconPapers)
JEL-codes: E30 F41 (search for similar items in EconPapers)
Date: 2007-02
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Related works:
Journal Article: A Structural Model of Australia as a Small Open Economy (2009)
Working Paper: A structural model of Australia as a small open economy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2007-01

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