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Do country-specific shocks matter? Evidence from Australia and high income countries

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Abstract:

A stylized fact of global upward trend in domestic-world output ratio for major small open economies is recognized in comparison with Australia's dichotomous experience with the ratio. This fact is used to shed light on the importance of country-specific shocks for small open economies using a simple real business cycle model. While it has been previously found that country-specific shocks are more significant source of business cycle fluctuations than worldwide shocks for Australia before the 1990s, this article suggests that the country-specific shocks may have become an important driver of output growth only in the early 1990s for Australia.

Keywords: C32; E32; F43; country-specific shocks; half-life; international business cycle; worldwide shocks

Document Type: Research Article

DOI: https://doi.org/10.1080/00036846.2011.610753

Affiliations: Department of Accounting and Finance,Monash University, ClaytonVIC 3800, Australia

Publication date: 2013-02-01

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