Transmission of a resource boom: The case of Australia

Vol: 
63/2019
Author name: 
Dungey M
Fry-McKibbin R
Volkov V
Year: 
2019
Month: 
September
Abstract: 

This paper presents evidence on the macroeconomic adjustment of a resource-rich country to a resource boom using the effects of Chinese industrialisation on Australia from 1988 to 2016. An SVAR model is specified, incorporating a proxy for Chinese resource demand and commodity prices to identify the effects of commodity supply and demand shocks on the Australian macroeconomy. We develop a multivariate historical decomposition to show how resource sector shocks lead the economy to deviate from a long-run projection. The paper identifies four phases of the transmission of the resource boom before its conclusion in 2015.

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