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The Effects of International Shocks on Australia's Business Cycle *
Author(s) -
LIU PHILIP
Publication year - 2010
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/j.1475-4932.2010.00637.x
Subject(s) - business cycle , economics , structural vector autoregression , econometrics , vector autoregression , sign (mathematics) , autoregressive model , gross domestic product , contrast (vision) , macroeconomics , monetary policy , mathematics , computer science , mathematical analysis , artificial intelligence
This article examines the sources of Australia's business cycle fluctuations. The cyclical component of gross domestic product is extracted using the Beveridge–Nelson decomposition and a structural Vector autoregressive model (VAR) model is identified using robust sign restrictions derived from a structural small open economy model. In contrast to previous VAR studies, international factors are found to contribute to over half of the output forecast errors whereas demand shocks have relatively modest effects.