How Australia Has Been Affected by US Monetary and Fiscal Policies: 1960 to 2022

Jonathan Leightner

doi:10.3390/jrfm17030096

How Australia Has Been Affected by US Monetary and Fiscal Policies: 1960 to 2022

Jonathan Leightner

James M. Hull College of Business

Research output: Contribution to journal › Article › peer-review

Abstract

This paper uses Reiterative Truncated Projected Least Squares to estimate the effects of US monetary and fiscal policy on Australia using quarterly data between 1960 and 2022. When Australia had a fixed exchange rate (1960–1983), both US fiscal and monetary policies were positively correlated with Australia’s GDP, which fits the predictions of a small-country IS/LM/BP model with relatively immobile capital. When Australia had a flexible exchange rate (1984–2022), US fiscal policy was positively correlated with Australia’s GDP, but US monetary policy was negatively correlated with Australia’s GDP, which fits the predictions of a large-country IS/LM/BP model.

Original language	English (US)
Article number	96
Journal	Journal of Risk and Financial Management
Volume	17
Issue number	3
DOIs	https://doi.org/10.3390/jrfm17030096
State	Published - Mar 2024

Keywords

Australia
capital controls
exchange rate regime
large-country IS/LM/BP
Mundell–Fleming model
small-country IS/LM/BP
spillover effects
USA

ASJC Scopus subject areas

Accounting
Business, Management and Accounting (miscellaneous)
Finance
Economics and Econometrics

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10.3390/jrfm17030096

Cite this

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title = "How Australia Has Been Affected by US Monetary and Fiscal Policies: 1960 to 2022",

abstract = "This paper uses Reiterative Truncated Projected Least Squares to estimate the effects of US monetary and fiscal policy on Australia using quarterly data between 1960 and 2022. When Australia had a fixed exchange rate (1960–1983), both US fiscal and monetary policies were positively correlated with Australia{\textquoteright}s GDP, which fits the predictions of a small-country IS/LM/BP model with relatively immobile capital. When Australia had a flexible exchange rate (1984–2022), US fiscal policy was positively correlated with Australia{\textquoteright}s GDP, but US monetary policy was negatively correlated with Australia{\textquoteright}s GDP, which fits the predictions of a large-country IS/LM/BP model.",

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AB - This paper uses Reiterative Truncated Projected Least Squares to estimate the effects of US monetary and fiscal policy on Australia using quarterly data between 1960 and 2022. When Australia had a fixed exchange rate (1960–1983), both US fiscal and monetary policies were positively correlated with Australia’s GDP, which fits the predictions of a small-country IS/LM/BP model with relatively immobile capital. When Australia had a flexible exchange rate (1984–2022), US fiscal policy was positively correlated with Australia’s GDP, but US monetary policy was negatively correlated with Australia’s GDP, which fits the predictions of a large-country IS/LM/BP model.

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KW - exchange rate regime

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KW - Mundell–Fleming model

KW - small-country IS/LM/BP

KW - spillover effects

KW - USA

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How Australia Has Been Affected by US Monetary and Fiscal Policies: 1960 to 2022

Abstract

Keywords

ASJC Scopus subject areas

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