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A Medium‐Scale New Keynesian Open Economy Model of Australia
Author(s) -
JÄÄSKELÄ JARKKO P.,
NIMARK KRISTOFFER
Publication year - 2011
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.1475-4932.2010.00688.x
Subject(s) - economics , new keynesian economics , inflation (cosmology) , business cycle , dynamic stochastic general equilibrium , open economy , matching (statistics) , keynesian economics , small open economy , exchange rate , monetary economics , macroeconomics , monetary policy , statistics , physics , mathematics , theoretical physics
We estimate a new Keynesian open economy dynamic stochastic general equilibrium model of Australia with a large number of shocks, frictions and rigidities, matching a large number of observable time series. We find that both foreign and domestic shocks are important drivers of the Australian business cycle. We also find that the initial impact on inflation of an increase in demand for Australian commodities is negative, because of an improvement in the real exchange rate, although there is a persistent positive effect on inflation that dominates at longer horizons.