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A Structural Model of Australia as a Small Open Economy

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  • Kristoffer P. Nimark

Abstract

This paper sets up and estimates a structural model of Australia as a small open economy using Bayesian techniques. Unlike other recent studies, the paper shows that a small micro‐founded model can capture the open economy dimensions quite well. Specifically, the model attributes a substantial fraction of the volatility of domestic output and inflation to foreign disturbances, close to what is suggested by unrestricted VAR studies. The paper also investigates the effects of various exogenous shocks on the Australian economy.

Suggested Citation

  • Kristoffer P. Nimark, 2009. "A Structural Model of Australia as a Small Open Economy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(1), pages 24-41, March.
    • Handle: RePEc:bla:ausecr:v:42:y:2009:i:1:p:24-41
    DOI: 10.1111/j.1467-8462.2009.00523.x
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    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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