RESEARCH DISCUSSION PAPERS

A Small Model of the Australian Macroeconomy: An Update

Andrew Stone, Troy Wheatley, Louise Wilkinson

RDP2005-11

December 2005

Almost a decade ago David Gruen and Geoff Shuetrim constructed a small macroeconomic model of the Australian economy. A comprehensive description of this model was subsequently provided by Beechey et al (2000). Since that time, however, the model has continued to evolve.

This paper provides an update on the current structure of the model and the main changes which have been made to it since Beechey et al. While the details of the model have changed, its core features have not. The model remains small, highly aggregated, empirically based, and non-monetary in nature. It also retains a well-defined long-run steady state with appropriate theoretical properties, even though its primary role is to analyse short-run macroeconomic developments.