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Monetary policy in a heterogeneous monetary union: the Australian experience

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  • Ernst Juerg Weber

Abstract

Australia is a monetary union with strong regional specialization. Manufacturing and service industries are located in the population centres on the south-eastern seaboard, and mining and pastoral activities take place in the interior and north of the continent. Monetary policy affects the interior and north more strongly than the south-eastern seaboard because Australian primary goods are mostly exported and the exchange rate provides the main transmission channel for monetary policy. The Reserve Bank of Australia must consider the economic interests of the interior and north and the south-eastern seaboard. Since monetary policy cannot differentiate between regions, there is a need for interregional macroeconomic risk-sharing.

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  • Ernst Juerg Weber, 2006. "Monetary policy in a heterogeneous monetary union: the Australian experience," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2487-2495.
    • Handle: RePEc:taf:applec:v:38:y:2006:i:21:p:2487-2495
    DOI: 10.1080/00036840500427742
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    1. Robert Dixon & David Shepherd, 2013. "Regional Dimensions of the Australian Business Cycle," Regional Studies, Taylor & Francis Journals, vol. 47(2), pages 264-281, February.
    2. Jeremy Lawson & Daniel Rees, 2008. "A Sectoral Model of the Australian Economy," RBA Research Discussion Papers rdp2008-01, Reserve Bank of Australia.
    3. David Norman & Thomas Walker, 2004. "Co-movement of Australian State Business Cycles," RBA Research Discussion Papers rdp2004-09, Reserve Bank of Australia.
    4. Thomas Walker & David Norman, 2004. "Co-movement of Australian State Business Cycles," Econometric Society 2004 Australasian Meetings 334, Econometric Society.
    5. Ridhwan, M.M. & Nijkamp, P. & Rietveld, P., 2008. "Regional development and monetary policy : a review of the role of monetary unions, capital mobility and locational effects," Serie Research Memoranda 0007, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    6. Víctor Hugo Torres‐Preciado, 2021. "Monetary policy and regional economic performance in Mexico: A structural panel VAR approach," Growth and Change, Wiley Blackwell, vol. 52(1), pages 195-223, March.
    7. Shaun Markham, 2020. "Monetary policy and regional unemployment," Reserve Bank of New Zealand Analytical Notes series AN2020/08, Reserve Bank of New Zealand.

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