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Output Composition of the Monetary Policy Transmission Mechanism: Is Australia Different?
Author(s) -
Phan Tuan
Publication year - 2014
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.12121
Subject(s) - economics , consumption (sociology) , interest rate channel , transmission channel , investment (military) , private consumption , monetary economics , channel (broadcasting) , monetary transmission mechanism , transmission (telecommunications) , interest rate , monetary policy , vector autoregression , macroeconomics , credit channel , inflation targeting , social science , electrical engineering , sociology , politics , political science , law , fiscal policy , engineering
This article compares the output composition of the monetary policy transmission mechanism in Australia to that for the Euro area and the USA. Four vector autoregressive ( VAR ) models are used to estimate the contributions of private consumption and investment to output reactions resulting from nominal interest rate shocks for the period 1982Q3–2007Q4. The results suggest that the investment channel plays a more important role than the consumption channel in Australia, while the contributions of the two channels are indistinguishable in the Euro area and the USA. The difference between Australia and the Euro area comes from differences in housing investment responses, whereas Australia is different to the USA mainly because it has a lower share of household consumption in total demand.