Title: Nominal exchange rate neutrality: the case of Australia

Authors: Chris B. Harbinger, Albert Wijeweera

Addresses: School of Economics, University of New England, Armidale, NSW 2351, Australia. ' Department of Arts and Sciences, The Petroleum Institute, P.O. Box 2533, Abu Dhabi, United Arab Emirates

Abstract: This study uses quarterly macroeconomic data over the period of 1984-2003 along with a seven-variable structural vector autoregression model to investigate the nominal exchange rate neutrality hypothesis for the case of Australia. Impulse response functions and variance decompositions are generated for four different variations of the model for empirically testing the hypothesis. Empirical evidence presented in this paper support the nominal exchange rate neutrality. In addition, we find that the neutrality is invariant to the choice of the nominal exchange rate or the measure of monetary aggregates used in the estimation.

Keywords: exchange rate neutrality; vector autoregression; VAR; Australia; macroeconomics; impulse response functions; variance decompositions; monetary aggregates; economics; business research.

DOI: 10.1504/IJEBR.2010.035004

International Journal of Economics and Business Research, 2010 Vol.2 No.5, pp.341 - 351

Published online: 01 Sep 2010 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article