We estimate an unobservable domestic business conditions index for Australia using a variety of observable macroeconomic and financial variables, relating it to an unobservable external index involving external variables relevant to Australia. Our small open economy, dynamic factor model uses...

We consider whether there has been a gradual decoupling of the Australian business cycle from its trading partners in Europe and North America and a closer convergence toward its trading partners in Asia. We set up a dynamic latent factor model to estimate common dynamic components or factors...