Key Features of Australian Business Cycles

IMF Working Papers, November 1, 2001

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Key Features of Australian Business Cycles

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Bibliographic details

• Authors: Paul Cashin, Sam Ouliaris
• Published: November 1, 2001
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451858501.001

Summary

• Paper objective: Identify and describe the key features of Australian business cycles during 1959-2000, including chronologies of:
  • Australia's classical cycle (expansions and contractions in the level of output)
  • Australia's growth cycle (periods of above-trend and below-trend rates of economic growth)
• Main summary conclusion: Large asymmetries exist in the duration and amplitude of phases in Australia's classical cycle, while the Australian growth cycle is much more symmetric. Filtered output and prices moved in a counter-cyclical fashion over the sample period, suggesting a dominance of shocks to aggregate supply affecting the Australian economy.

Major findings and interpretations

• Cycle chronology and symmetry:
  • The classical cycle exhibits large asymmetries in both duration and amplitude of phases.
  • The growth cycle is much more symmetric on duration and amplitude measures.
• Output and prices co-movement:
  • Filtered real output and the price level moved in a counter-cyclical fashion over 1959-2000.
  • This counter-cyclical movement of output and prices is interpreted as suggesting a dominance of shocks to aggregate supply in driving Australian business cycle dynamics during the sample period.

Methods and technical notes (as described)

• Cycles evaluated:
  • Classical cycle: expansions and contractions in the level of output.
  • Growth cycle: above-trend and below-trend rates of economic growth.
• Filters and techniques mentioned in keywords:
  • Filtered real GDP
  • OC filter / OC method
  • Rank correlation
  • Duration dependence
  • Business cycle-dating rule
• Data sample period: 1959-2000

Policy-relevant implications (derived from findings)

• If aggregate supply shocks dominate:
  • Policy responses focused solely on demand management may be insufficient to stabilize both output and prices.
  • Understanding asymmetries in the classical cycle is important for designing counter-cyclical policy measures that account for differing durations and amplitudes of expansions and contractions.
• Symmetry of the growth cycle implies:
  • Policy aimed at stabilizing growth rates may face more regular, symmetric dynamics compared with policies targeting output levels.

Content in this bundle

• Key Features of Australian Business Cycles - WP/01/171
  • Key Features of Australian Business Cycles - WP/01/171 (Markdown version)
  • Key Features of Australian Business Cycles - WP/01/171 (PDF)