RDP 2015-11: Unprecedented Changes in the Terms of Trade Appendix B: Data Sources

B.1 Data Used in Estimation

The model is estimated using 14 macroeconomic time series. Real GDP, consumption, investment, net exports and hours worked are taken from the Australian Bureau of Statistics (ABS) national accounts data (ABS Cat No 5206.0). All data are seasonally adjusted and measured in chain volume terms, except for the net exports-to-GDP ratio, which is seasonally adjusted and measured in current prices, and hours worked, which is seasonally adjusted. We convert all of the real activity series into per capita series by dividing by the Australian population, which we derive from the GDP per capita series. Our final domestic activity series is the ratio of nominal non-traded consumption to aggregate consumption. We discuss the construction of the non-traded consumption series below.

Our measures of Australian inflation are the consumer price index and non-tradeables price index, both excluding interest and tax. These series are published by the ABS (ABS Cat No 6401.0). Our measure of the nominal exchange rate is the Australian trade-weighted index and our policy interest rate is the cash rate. We source these series from the Reserve Bank of Australia (RBA) statistical tables F1.1 and F11.

For foreign GDP we use the index of Australia's major trading partners' GDP, calculated at purchasing power parity exchange rates, produced by the RBA. For foreign interest rates, we use the average policy rate in the United States, Japan and the euro area (we use German interest rates before the introduction of the euro). Finally, we calculate foreign inflation implicitly using Australian inflation and the real exchange rate index, published by the RBA in statistical table F.15.

B.2 Data Used in Calibration

This section describes the calculation of the sectoral data used to calibrate the model.

  • Tradeable and non-tradeable consumption: We allocated private consumption categories in the national accounts to either tradeable or non-tradeable consumption to match the components of the published tradeable and non-tradeable consumption price indices (see ABS Cat No 6461.0, Appendix 2 for these categories). Tradeable consumption is the sum of private food; cigarettes & tobacco; alcohol; clothing & footwear; purchase of vehicles; communications; and recreation & culture consumption. It also includes 24 per cent of healthcare consumption, reflecting the share of pharmaceutical products, which are tradeable, in total healthcare consumption and 50 per cent of other household services. Non-tradeable consumption includes rent, electricity, gas & water; operation of vehicles; transport services; education; hotels, cafes & restaurants; insurance & financial services; as well as healthcare and other households services not allocated to tradeable consumption. We assume that the allocation of private consumption between tradeable and non-tradeable goods is the same as for private consumption. We measure imported consumption as the sum of consumption goods imports, 75 per cent of services imports and 25 per cent of intermediate imports.
  • Tradeable and non-tradeable investment: We define tradeable investment as the sum of machinery & equipment investment and 36 per cent of both non-residential construction and public investment. We base the tradeable shares of construction on Table 1 of Burstein, Neves and Rebelo (2004). Non-tradeable investment is total investment less tradeable investment. We measure imported investment as the sum of capital goods imports plus 25 per cent of services imports and 75 per cent of intermediate imports.
  • Resource and non-resource exports: We use the measure of resource exports published in ABS Cat No 5302.0. Non-resource exports equal total exports less resource exports.
  • Hours worked: As hours worked data is unavailable at an industry level in Australia, we construct our measure using employment data. This will result in some inaccuracy if average hours worked varies across industries. We define tradeable employment as the sum of agriculture; mining; wholesale trade; accomodation & food; and transport, postal & warehousing employment. Our measure of employment in the resources sector is mining employment. As discussed in Plumb et al (2013), this understates total employment in the resources sector as it excludes workers in industries that service the operations of the mining sector. Our model calibration takes account of this feature of the data. Non-tradeable employment is all employment not categorised as tradeable or mining.