Output Composition of the Monetary Policy Transmission Mechanism: Is Australia Different?

Abstract

This article compares the output composition of the monetary policy transmission mechanism in Australia to that for the Euro area and the USA. Four vector autoregressive (VAR) models are used to estimate the contributions of private consumption and investment to output reactions resulting from nominal interest rate shocks for the period 1982Q3–2007Q4. The results suggest that the investment channel plays a more important role than the consumption channel in Australia, while the contributions of the two channels are indistinguishable in the Euro area and the USA. The difference between Australia and the Euro area comes from differences in housing investment responses, whereas Australia is different to the USA mainly because it has a lower share of household consumption in total demand.

Effects of macroeconomic policy shock on the labour market dynamics in Australia

“…Regarding the wage data, there are no series available for the longer period. So, being consistent with Phan (2014), the real unit labour cost index is used as a proxy for a wage. Real unit labour cost is estimated by ABS as the ratio of average labour cost to average labour productivity and deflated by GDP deflator.…”