The present paper examines the impact of foreign business cycles on Australian exports. After accounting for the effect of domestic activity on exports it has been found that foreign activity has at times had a large impact on Australian exports and, therefore, also on Australian GDP. Evidence is also found that the US and Japan have a high output elasticity of demand for Australia’s exports. Consequently, their business cycles have a larger impact on Australia’s exports than that suggested by their market shares of Australian exports.
- Business cycles