This paper examines the influences of the world’s two largest developed economies, namely the USA and the Euro area, on Australia as an exemplar of a small open economy. To do so, we specify and estimate a structural VAR with bilateral linkages between the two large economies, and allow shocks originating in either to affect the Australian economy. More specifically, we show the role of foreign output shocks, the differential effects of USA- or Euro-area-sourced inflation and interest rate shocks on the Australian economy, and the relative unimportance of these foreign shocks to variations in the value of the Australian currency.

Item Type:	Refereed Article
Research Division:	Economics
Research Group:	Applied Economics
Research Field:	International Economics and International Finance
Objective Division:	Economic Framework
Objective Group:	International Trade
Objective Field:	International Trade not elsewhere classified
Author:	Dungey, MH (Professor Mardi Dungey)
Author:	Osborn, DR (Professor Denise Osborn)
Author:	Raghavan, MV (Dr Mala Raghavan)
ID Code:	94979
Year Published:	2014
Web of Science® Times Cited:	1
Deposited By:	Tasmanian School of Business and Economics
Deposited On:	2014-09-22
Last Modified:	2015-04-24
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