Transmission of a Resource Boom: The Case of Australia

This paper presents evidence on the macroeconomic adjustment of a resource-rich
country to a resource boom using the effects of Chinese industrialisation on Australia
from 1988 to 2016. An SVAR model is specified, incorporating a proxy for Chinese
resource demand and commodity prices to identify the effects of commodity supply and
demand shocks on the Australian macroeconomy. We develop a multivariate historical
decomposition to show how resource sector shocks lead the economy to deviate from a
long-run projection. The paper identifies four phases of the transmission of the resource
boom before its conclusion in 2015.