Trans-Tasman transmission of monetary shocks : evidence from a VAR approach : a thesis submitted in partial fulfillment of the requirements of the Master of Business Studies (Financial Economics) at Massey University, Albany, 2004

Abstract

This study investigates the cross-country transmission of monetary shocks, using evidence from Australia and New Zealand. A vector autoregressive model is constructed, using data from 1985:1-2003:4. The empirical results indicate that a contractionary monetary shock in either Australia or New Zealand has real effects in the short-run in both countries, however an Australian shock generates more significant responses of most variables. Australian output is found to be significantly more sensitive than New Zealand output to monetary innovations in either country.