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How Australia Has Been Affected by US Monetary and Fiscal Policies: 1960 to 2022

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  • Jonathan Leightner

    (Hull College of Business, Summerville Campus, Augusta University, 1120 15th Street, Augusta, GA 30912, USA)

Abstract

This paper uses Reiterative Truncated Projected Least Squares to estimate the effects of US monetary and fiscal policy on Australia using quarterly data between 1960 and 2022. When Australia had a fixed exchange rate (1960–1983), both US fiscal and monetary policies were positively correlated with Australia’s GDP, which fits the predictions of a small-country IS/LM/BP model with relatively immobile capital. When Australia had a flexible exchange rate (1984–2022), US fiscal policy was positively correlated with Australia’s GDP, but US monetary policy was negatively correlated with Australia’s GDP, which fits the predictions of a large-country IS/LM/BP model.

Suggested Citation

  • Jonathan Leightner, 2024. "How Australia Has Been Affected by US Monetary and Fiscal Policies: 1960 to 2022," JRFM, MDPI, vol. 17(3), pages 1-17, February.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:3:p:96-:d:1344465
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    References listed on IDEAS

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    1. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2010. "New Keynesian versus old Keynesian government spending multipliers," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 281-295, March.
    2. Jonathan Leightner & Tomoo Inoue & Pierre Lafaye de Micheaux, 2021. "Variable Slope Forecasting Methods and COVID-19 Risk," JRFM, MDPI, vol. 14(10), pages 1-22, October.
    3. Chowdhury, Khorshed, 2012. "Modelling the dynamics, structural breaks and the determinants of the real exchange rate of Australia," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(2), pages 343-358.
    4. Michael Carlberg, 2005. "International Economic Policy Coordination," Springer Books, Springer, number 978-3-540-27318-9, January.
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