SOURCES OF EXCHANGE-RATE AND PRICE-LEVEL FLUCTUATIONS IN 2 COMMODITY EXPORTING COUNTRIES - AUSTRALIA AND NEW-ZEALAND

Dynamic interactions between the exchange rate, domestic price level a nd terms of trade of Australia and New Zealand, relative to the United States, are evaluated. Under the restriction that a nominal shock has no long-run effect on the relative terms of trade, real shocks domina te nominal shocks in accounting for fluctuations in real and nominal e xchange rates. For Australia, real shocks that improve the relative te rms of trade have a negligible effect on the domestic price level rela tive to that of the United States but, for New Zealand, there is a sig nificant permanent increase in the relative domestic price level.