Rival Macroeconomic Paradigms and Australian Stylised Facts

Neil Dias Karunaratne ()
Additional contact information
Neil Dias Karunaratne: The University of Queensland, Department of Economics, Postal: Brisbane QLD 4072 Australia, ,, http://www.uq.edu.au/economics/

Economia Internazionale / International Economics, 2000, vol. 53, issue 2, 185-201

Abstract: This paper reports the stylised facts resulting from the tests of rival macroeconomic models in explaining the Australian business cycle during the sample period 1966(3)-1995(3). The dominant rival paradigms such as the New Classical, Keynesian and the Real Business Cycle theories have been tested using both Granger causality and non-nested testing techniques. The time-series data used for modelling the rival paradigms were processed using unit root and cointegration econometrics to guard against possible spurious regression inferences due to nonstationarity in the data. Parsimonious data congruent models for testing the rival paradigms were derived by the application of the general-to-specific methodology. The problem of non-spherical errors created by the use of generated regressors in the specification of business cycle models was tackled by replacing ordinary least squares by generalised least squares estimates. The empirical results supported the conclusion that hybrid macroeconomic paradigms encompassing both demand and supply side shocks provide more plausible explanations of the Australian business cycle than tests narrowly focussed only on demand side shocks. The study results challenge the narrow view that rival macroeconomic theories would have failed to provide meaningful guidelines to Australian policymakers to implement counter-cyclical policies during the study period.

Keywords: New Classical; Keynesian; Real Business Cycle; General-toSpecific; Unit Roots; Cointegration; Granger Causality; Non-nested tests; Generated Regressors; Australia (search for similar items in EconPapers)
JEL-codes: C50 E10 (search for similar items in EconPapers)
Date: 2000
References: Add references at CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0248

Access Statistics for this article

Economia Internazionale / International Economics is currently edited by Giovanni Battista Pittaluga

More articles in Economia Internazionale / International Economics from Camera di Commercio Industria Artigianato Agricoltura di Genova Via Garibaldi 4, 16124 Genova, Italy. Contact information at EDIRC.
Bibliographic data for series maintained by Angela Procopio ().