RDP 8403: Modelling Recent Developments in Australian Asset Markets: Some Preliminary Results Appendix: RBII Specification[1]

1. Household Expenditure

2. Rate of Growth of Business Fixed Capital Stock

3. Stock of Dwellings

4. Exports of Goods and Services

5. Imports of Goods and Services

6. Domestic Production

7. Price of Domestic Production

8. Price of Exports of Goods and Services

9. Price of Government Current Expenditure

10. Average Weekly Earnings

11. Rate of Growth of Employment

12. Labour Supply

13. Non-Bank Holdings of Government Securities

14. Net Australian Private Capital Owned by Overseas Residents

15. Bank Advances

16. Personal Income Taxes

17. Bank Bill Rate

18. Bank Advances Rate

19. Money Rate

20. Bond Rate

21. ($A/$US) Exchange Rate

22. Foreign Reserves

23. Domestic Credit

24. Volume of Money

25. Inventories

26. Expected Sales

27. Private Expected Sales

28. Business Fixed Capital Stock

29. Employment

A bank advances to private sector
B government bonds held by private non-bank groups
c real cash benefits to persons
C domestic credit
CTB effective company tax base
d real household consumption expenditure
E exchange rate ($A/SUS)
F net Australian private capital owned by overseas residents
Fg net Australian government capital owned by overseas residents
F net Australian private capital owned by overseas residents
g1 real government current expenditure
g2 real government capital expenditure
g3 real public authorities capital expenditure
h reauired liquidity ratio of the banking sector
i real imports of goods and services
I interest payments on government debt
k proportionate change in the real stock of business fixed capital
k1 proportionate change in the real stock of non-mining business fixed capital
k2 prooortionate change in the stock of mining business fixed capital
K real stock of business fixed capital
Kh real stock of dwellings
Kminv stock of mining capital
l proportionate change in employment
L employment
m real stock of money (M/P)
mpk marginal product of capital
mpl marginal product of labour
M stock of money (M3)
MT target stock of money (M3)
MISC miscellaneous items in the Commonwealth budget deficit
N labour supply
P price of domestic output
Pbt price of domestic cutout net of indirect taxes
Pd consumption deflator
pg price of government consumption expenditure
Pi Australian import prices ($US)
Pw world prices ($US)
Pwl price of wool ($US)
Px price of exports
QA synthetic variable for growth of bank advances, 1973
QDS synthetic variable for U.S. dock strike, 1969
QE synthetic variable for expectations about the exchange-rate, 1972-6
QER synthetic variable for timing of exchange rate change 1972, 1973, 1974, 1976
QF synthetic variable for capital inflow during “resource boom”, 1980
Qi synthetic variable for growtn of imports, 1974–1980
Q1 dummy variable for shake-out effect in labour market 1974-6
Q60 synthetic variable for period or fixed exchange rate 1959–1971
Qrbl dummy variable for increases in commercial bill rate 1974
Qrm synthetic variable for rise in rm, 1973
QS synthetic variable for increases in official interest-rates, 1961, 1973
QS8 dummy variable for the introduction of Australian Savings Bonds 1976(1)–(2)
QUS dummy variable for devaluation or $US, 1973
ra interest rate on bank advances
rb interest rate on 10 year government bonds
rbe expected next-period interest rate on 10 year government bonds
rbl interest rate on 90 day commercial bills
reu interest rate on 90 day Eurodollar bills
rk real marginal cost of capital
rm interest rate on trading bank fixed deposits
rw interest rate on 10 year US government bonus
R gold ana foreign exchange reserves
RT target stock of gold and foreign exchange reserves
s sales
se expected sales
Inline Equation private expected sales
sd real statistical discrepancy
t time trend starting in 1959(3)
t11 index of income tax rate schedule
t2 average rate of tax on consumption
t3 average rate of tariffs
t4 average rate of payroll tax
t5 statutory company tax rate
t6 average rate of tax on expenditure
r1 receipts of direct taxes
r11 receipts of personal income tax-
T12 receipts of company tax
T2 receipts of indirect taxes
T21 receipts of sales tax
T22 receipts of payroll tax
v real stock of inventories of goods
wa index of real award wages
wr real marginal cost of labour
w index of average earnings
x real exports of goods and services
xd real demand for exports of goods and services
xs real supply of exports of goods and services
xw real world exports of goods and services
y real domestic output (net of depreciation)
ȳ real normal domestic output (net or depreciation)
yd real disposable income
yf real farm output (net of depreciation)
ynf real non-farm output (net of depreciation)
z population of working age
ε expected rate of depreciation
Parameter Estimate
α1 0.112
α2 0.688
α3 0.024
α4 0.834
α5 0.207
α6 0.900
α7 0.413
α8 0.538
α9 1.435
α10 0.232
α11 2.169
α12 0.130
α14 0.056
α15 0.206
α16 0.415
α17 0.225
α18 0.219
α19 0.447
α20 0.272
α21 0.048
α22 0.500
α23 0.500
β1 −0.029
β2 −5.775
β3 0.200
β4 7.321
β5 −4.086
β6 −3.235
β7 0.934
β8 0.489
β9 −0.391
β10 0.400
β11 0.009
β12 −1.019
βl3 −0.117
β14 0.061
β15 0.214
β16 −0.333
βl7 0.645
β18 −1.065
β19 0.015
β20 0.188
β21 0.928
β22 −0.079
β23 0.180
β24 0.019
β25 0.231
β26 0.718
β27 −0.130
β28 0.005
β29 0.200
β30 0.048
β31 0.381
β32 −0.044
β33 0.258
β34 0.081
β35 1.56611
β36 0.139
β37 −0.327
β40 19.606
β41 −19.606
β43 −0.503
β44 −0.113
β45 0.250
β46 6.765
β47 −0.500
β48 0.163
β49 0.057
β50 0.172
β51 0.029
β52 −3.8025
β53 0.558
β54 0.5436
β55 0.043
β56 0.500
β57 0.050
β58 0.022
β59 −0.027
β60 0.530
β61 0.050
β62 0.700
β63 0.700
β64 0.500
Variable[2] Notation Growth Rate
d, K, Kh, x, i, y, v, Inline Equation, Inline Equation, Inline Equation, c*, se, Inline Equation, sd*, Inline Equation, Inline Equation λ1 (.012)
P, Px, Inline Equation, Inline Equation, Inline Equation λ2 − λ1 (.009)
Pg, W λ2 − λ1 + λ4 (.0165)
N, L, Z* λ1 − λ4 (.0045)
Trend rate of technical progress λ3 (.0045)
Trend rate of growth of labour productivity λ4 = λ3/(1 − β10) (.0075)
wa λ5 (.0040)
B, F, A, T11, R*, C, M, CTB*, Inline Equation, MISC*, Mt*, I*, Inline Equation λ2 (.021)
E, rb, rb1, Inline Equation, r*eu, rm, ra, k, l, h*, Inline Equation, Inline Equation, Inline Equation, Inline Equation, Inline Equation, Inline Equation (0.0)


A subscript of zero (o) indicates a constant. D is the differential operation d/dt, e is the exponential operator, and log is the logarithmic (to base e) operator. A variable with a hat (^) above it indicates the desired value of the variable. [1]

An asterisk (*) next to a variable indicates that it is exogenous. [2]