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Effects of macroeconomic policy shock on the labour market dynamics in Australia

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  • Mukti Nath Subedi

    (Australian National University)

Abstract

Inspired by fiscal and monetary policy performance during global financial crisis (GFC) of 2007-08, this study investigates the effects of macroeconomic policy shocks on the labour market dynamics in Australia using a vector auto-regression (VAR) method. This study examines the dynamic response of output, unit labour cost, total hours worked and employment to changes in government spending and cash rate for 1985:3-2015:1. The results suggest that in response to positive cash rate shock total hours worked and employment react negatively, whereas unit labour cost reacts positively. On the other hand, in response to positive government spending shock, total hours worked and employment response positively, whereas, unit labour cost responds negatively.

Suggested Citation

  • Mukti Nath Subedi, 2016. "Effects of macroeconomic policy shock on the labour market dynamics in Australia," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 5(1), pages 71-85, March.
    • Handle: RePEc:sek:jijoes:v:5:y:2016:i:1:p:71-85
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    Keywords

    Labour market; Vector Autoregression; Macroeconomic policy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other

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