Research Discussion Paper – RDP 7902 Financial Modelling in Australia


This paper provides a survey of financial modelling in Australia. It complements the surveys by Kevin Davis and Mervyn Lewis for the Academy of Social Sciences, and by Michael Porter at the Eighth Conference of Economists held recently in Melbourne. The current paper focusses on econometric relationships in the Australian financial sector and between the financial sector and the rest of the economy to provide a useful feel for what is known and the topics which future research should examine.

The paper illustrates that much useful work has been done. There are, however, many important areas which need further work. These are pointed out by Bill Evans. From his list I would wish to emphasise: the role of interest rate and exchange rate expectations; the effect of changes in the market value of debt and equity; the international linkages of the Australian economy; and careful simulation analysis of existing and future models.

Considerable effort has been given to preparing balanced discussion of all important studies of financial modelling in Australia. The author would be interested to receive comments on the paper so that any omissions or imbalances can be corrected.