RDP 2008-08: The Role of International Shocks in Australia's Business Cycle 6. Conclusion

This paper uses a small open economy model to investigate the sources of business cycle fluctuations for the Australia economy. A SVAR is identified using robust sign restrictions derived from an estimated small structural (DSGE) model rather than imposing zero-type restrictions. The results suggest that international factors account for over half the domestic output fluctuations while demand type shocks play a small role.