The relative impact of the US and Japanese business cycles on the Australian economy

Abstract

The purpose of this paper is to assess the relative impact of the US and Japanese business cycles on the Australian economy. Our vector autoregression (VAR) models included real domestic products (GDPs) of three countries and world average oil price, which are quarterly covering the period 1959:3-1996:4. In order to take account of a possible stuctural change, estimates are also made separately for the fixed exchange rate and flexible exchange rate periods. The rolling regression technique is utilised to trace the patterns and extents of changing importance between th US and Japan's impacts on the Australian economy. We find that over the entire sample period, the business cycles of both the..