A Simple, Structural, and Empirical Model of the Antipodean Transmission Mechanism

Thomas Lubik

No DP2005/06, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: This paper studies the transmission of business cycles and the sources of economic fluctuations in Australia and New Zealand by estimating a Bayesian DSGE model. The theoretical model is that of two open economies that are tightly integrated by trade in goods and assets. They can be thought of as economically large relative to each other, but small with respect to the rest of the world. The two economies are hit by a variety of country-specific and world-wide shocks. The main findings are that the pre-eminent driving forces of Antipodean business cycles are worldwide technology shocks and foreign, i.e. rest-of-the-world, expenditure shocks. Domestic technology shocks and monetary policy shocks appear to play only a minor role. Transmission of policy shocks is asymmetric, and neither central bank is found to respond to exchange rate movements. The model can explain 15 percent of the observed exchange rate volatility.

JEL-codes: C11 C51 C52 E58 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: A simple, structural, and empirical model of the antipodean transmission mechanism (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbdps:2005/06

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