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AbstractIn this paper, we examine the dynamic relationship between physical and mental health. We ask whether and to what extent mental health affects subsequent physical health, and drawing eight waves of panel data from the Household Income and Labour Dynamics of Australia (HILDA) Survey, use a dynamic panel estimator with instrumental variables for identification. We find that good past mental health promotes present physical health. We also show that good past physical health predicts good present physical health. Our findings imply that policies and intervention programs should focus on helping individuals with mental health conditions to reduce the risk of negative spillover effects on their physical health.