International Transmissions to Australia: The Roles of the USA and Euro Area

Mardi Dungey, Denise Osborn and Mala Raghavan ()

The Economic Record, 2014, vol. 90, issue 291, 421-446

Abstract: This paper examines the influences of the world's two largest developed economies, namely the USA and the Euro area, on Australia as an exemplar of a small open economy. To do so, we specify and estimate a structural VAR with bilateral linkages between the two large economies, and allow shocks originating in either to affect the Australian economy. More specifically, we show the role of foreign output shocks, the differential effects of USA- or Euro-area-sourced inflation and interest rate shocks on the Australian economy, and the relative unimportance of these foreign shocks to variations in the value of the Australian currency.

Date: 2014
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Working Paper: International Transmissions to Australia: The Roles of the US and Euro Area (2013)
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