An Estimated Small Open Economy New-Keynesian Model of the Australian Economy

Hassan Heidari ()
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Hassan Heidari: Department of Economics, Urmia University, P.O.Box 165, Urmia, Iran

Journal for Economic Forecasting, 2010, issue 4, 7-15

Abstract: This paper estimates a small open economy New-Keynesian model using data from Australia and the US economy with Full Information Maximum Likelihood method. Our estimated US structural parameters are in line with those of Giordani (2004) on Canadian data. For Australian parameters we find that the real exchange rate has little effect on output gap and inflation, whereas the foreign output gap has a significant effect on both of them. Moreover, our results show a prominent role for backwardlooking behaviour for Australian inflation.

Keywords: Open Economy; New Keynesian model; FIML; Australia (search for similar items in EconPapers)
JEL-codes: C22 E30 E50 F41 F42 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2010:i:4:p:7-15

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