A New Keynesian SVAR model of the Australian economy

Shawn Leu

Economic Modelling, 2011, vol. 28, issue 1, 157-168

Abstract: We estimate an SVAR model for the Australian economy based on an open economy New Keynesian model that accounts for the forward-looking behaviour exhibited by economic agents. Deep structural parameters are identified by placing exclusion restrictions on the VAR residuals and the covariance matrix. Dynamic responses show no price and exchange rate puzzles and indicate that the Reserve Bank of Australia (RBA) stabilises output fluctuations in the short run while maintaining a medium-run inflation target since 1984. Aggregate demand shocks are found to be driven by external demands. The RBA exercises caution in responding to aggregate supply shocks.

Keywords: SVAR model; New Keynesian; Rational expectations; Impulse response function; Empirical puzzles (search for similar items in EconPapers)
JEL-codes: C32 C51 E52 E58 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:1:p:157-168

DOI: 10.1016/j.econmod.2010.09.015

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