External shocks and the Sri Lankan economy: a SVAR approach

Crawford School of Public Policy | Centre for Applied Macroeconomic Analysis

Event details

Seminar

Date & time

Thursday 01 September 2016
11.00am–12.00pm

Venue

Seminar Room 2, Level 1, JG Crawford Building 132, Lennox Crossing, ANU

Speaker

Yashodha Warunie Senadheera, PhD student, Centre for Applied Macroeconomic Analysis, Crawford School, ANU.

Contacts

Rossana Bastos
6125 8108

In this seminar Yashodha Senadheera will provide an overview of her recent paper, External Shocks and the Sri Lankan Economy: a SVAR Approach.

This paper empirically investigates the effects of external shocks on the Sri Lankan economy using a Structural Vector Auto-Regression (SVAR) model with a block exogeneity assumption and long and short-run restrictions. Data from 1996Q2 to 2014Q4 is used in the analysis. The paper examines the impact of foreign monetary policy shocks on the domestic economy using alternative measures, namely, the effective federal funds rate and the US shadow short rate. Although domestic shocks are the primary source of macroeconomic fluctuations in Sri Lanka, foreign shocks also play a considerable role in explaining the variability in output growth and domestic inflation. Shocks to foreign output growth and oil price inflation have a notable effect on the growth of domestic output. Shocks to the effective federal funds rate explain the variance of Sri Lanka’s output growth better than the shocks to the US shadow short rate. Further, the impacts of oil price inflation and the effective federal funds rate shocks on the domestic inflation are noteworthy. The foreign shocks are transmitted to the domestic economy through the trade channel as well as through the financial market channel.

Yashodha Warunie Senadheera is a third year PhD student at Crawford School. She completed her Masters and Graduate Diploma in International and Development Economics at ANU in 2013. She is an Associate Member of the Chartered Institute of Management Accountants, UK and has worked as a fund manager at the Central Bank of Sri Lanka. Her research interest is on monetary economics.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.

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