RDP 9111: Monthly Movements in the Australian Dollar and Real Short-Term Interest Differentials: An Application of the Kalman Filter References

Allan, R.H., R.G. Elstone, G. Lock and T.J. Valentine (1990), Foreign Exchange Management, (Allen and Unwin), Sydney.

Aoki, M. and A. Havenner (1986), “Approximate State Space Models of some Vector-Valued Macroeconomic Time Series for Cross-Country Comparisons”, Journal of Economic Dynamics and Control, 10(1/2):149–155.

Baldwin, R.E. (1990), “Re-interpreting the Failure of the Foreign Exchange Market Efficiency Tests: Small Transaction Costs, Big Hysteresis Bands”, Centre for Economic Policy Research, Discussion Paper No. 407, April.

Berndt, E.R., B.H. Hall, R.E. Hall, and J.A. Hausman (1974), “Estimation and Inference in Non-Linear Structural Models”, Annals of Economic and Social Measurement, 3:653–665.

Beveridge, S. and C.R. Nelson (1981), “A New Approach to the Decomposition of Economic Time Series into Permanent and Transitory Components, with Particular Attention to the Measurement of the ‘Business Cycle’”, Journal of Monetary Economics, 7:151–174.

Black, F. (1986), “Noise”, Journal of Finance, 41(3):529–543.

Blundell-Wignall, A. and R.G. Gregory (1989), “Exchange Rate Policy in Advanced Commodity Exporting Countries: the Case of Australia and New Zealand”, OECD Working Paper No. 83, June.

Campbell, J.Y. and R.H. Clarida (1987), “The Dollar and Real Interest Rates”, Carnegie-Rochester Conference Series on Public Policy, 27:103–140.

Coughlin, C.C. and K. Koedijk (1990), “What do we know about the Long-Run Real Exchange Rate?”, Federal Reserve Bank of St. Louis Review, 72(1):36–48, January/February.

Cutler, D.M., J.M. Poterba and L.H. Summers (1990), “Speculative Dynamics and the Role of Feedback Traders”, NBER Working Paper No. 3243.

De Long, J.D., A. Shleifer, L.H. Summers and R.J. Waldmann (1990), “Noise Trader Risk in Financial Markets”, Journal of Political Economy, 98(4):703–738.

De Long, J.D., A. Shleifer, L.H. Summers and R.J. Waldmann (1991), “The Survival of Noise Traders in Financial Markets”, Journal of Business, 64(1):1–19.

Doran, H.E. (1990), “Using the Kalman Filter to Estimate Sub-Populations”, University of New England, Department of Econometrics, Working Papers in Econometrics and Applied Statistics No. 44, March.

Dornbusch, R. (1976), “Expectations and Exchange Rate Dynamics”, Journal of Political Economy, 84(6):1161–1176.

Dornbusch, R. (1989), “Real Exchange Rates and Macroeconomics: A Selective Survey”, Scandinavian Journal of Economics, 91(2):401–432.

Fama, R. and R.R. Bliss (1987), “The Information in Long-Maturity Forward Rates”, American Economic Review, 77:680–692.

Fama, R. and M. Gibbons (1982), “Inflation, Real Returns, and Capital Investment”, Journal of Monetary Economics, 9:297–323.

Flood, R.P. (1987), “Comments on Speculation and the Volatility of Foreign Currency Exchange Rates”, in Brunner, K. and A. Meltzer (eds.), Carnegie-Rochester Conference Series on Public Policy, (North Holland), Amsterdam, 26:57–61.

Frankel, J.A. (1985), “The Dazzling Dollar”, Brookings Papers on Economic Activity, 1:199–217.

Frankel, J.A. (1988), “Recent Estimates of Time-Variation in the Conditional Variance and in the Exchange Risk Premium”, Journal of International Money and Finance, 7:115–125.

Frankel, J.A. and K. Froot (1990), “Exchange Rate Forecasting Techniques, Survey Data, and Implications for the Foreign Exchange Market”, National Bureau of Economic Research, Working Paper 3470, October.

Ghosh, A.R. (1990), “Accounting for Real Exchange Rate Movements in the Short-Run and in the Long-Run”, John M. Olin Program for the Study of Economic Organisation and Public Policy Discussion Paper No. 46, Princeton University, February.

Gruen, D.W.R. and G.D. Menzies (1991), “The Failure of Uncovered Interest Parity: Is it Near-Rationality in the Foreign Exchange Market?”, Reserve Bank of Australia, Research Discussion Paper 9103.

Gruen, D.W.R. and J. Wilkinson (1991), “Australia's Real Exchange Rate – Is It Determined by the Terms of Trade or by Real Interest Differentials?”, Reserve Bank of Australia, Research Discussion Paper 9108.

Hamilton, J.D. (1985), “Uncovering Financial Market Expectations of Inflation, Journal of Political Economy, 93(6):1224–1241.

Harvey, A.C. (1981), Time Series Models, (Philip Allen), Oxford, Chapter 4.

Harvey, A.C. (1988), Applications of the Kalman Filter in Econometrics, (Philip Allen), Oxford, Chapter 8.

Harvey, A.C. (1989), Forecasting, structural time series models and the Kalman Filter, (Cambridge University Press), Chapters 3 – 4.

Hodrick, R.J. (1987), The Empirical Evidence on the Efficiency of Forward and Futures Foreign Exchange Markets, Fundamentals of Pure and Applied Economics, Volume 24, (Harwood Academic Publishers).

Hoey, R. (1986), Decision Makers Poll, Drexel Burnham Lambert.

Huizinga, F. (1987), “An Empirical Investigation of the Long-Run Behaviour of Real Exchange Rates”, Carnegie-Rochester Conference Series on Public Policy, 27:149–214.

Kalman, R.E. (1960), “A New Approach to Linear Filtering and Prediction Problems, Transactions ASME Journal of Basic Engineering, 82:35–45, March.

Macfarlane, I.J. and W.J. Tease (1989), “Capital Flows and Exchange Rate Determination”, Reserve Bank of Australia, Research Discussion Paper 8908.

Meese, R.A. and K. Rogoff (1983), “Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample?”, Journal of International Economics, 14:3–24.

Meese, R.A. and K. Rogoff (1988), “Was It Real? The Exchange Rate-Interest Differential Relation over the Modern Floating-Rate Period”, Journal of Finance, 43(4):933–948.

Miller, M. and P. Weller (1991), “Financial Liberalisation, Asset Prices and Exchange Rates]”, OECD Working Paper No. 95, February.

Mishkin, F.S. (1987), “The Dollar and Real Interest Rates – A Comment”, Carnegie-Rochester Conference Series on Public Policy, 27:141–148.

Sachs, J. (1985), “The Dollar and the Policy Mix: 1985”, Brookings Papers on Economic Activity, 1:117–197.

Samuelson, P. (1965), “Proof that Properly Anticipated Prices Fluctuate Randomly”, Industrial Management Review, 6:41–49, Spring.

Shafer, J.R. and B.E. Loopesko (1983), “Floating Exchange Rates after Ten Years”, Brookings Papers on Economic Activity, 1:1–86.

Shiller, R.J. (1979), “The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure”, Journal of Political Economy, 87:1190–1219.

Smith, J. and D.W.R. Gruen (1989), “A Random Walk Around the $A: Expectations, Risk, Interest Rates and Consequences for External Imbalance”, Reserve Bank of Australia, Research Discussion Paper 8906.

Stockman, A.C. (1987), “The Equilibrium Approach to Exchange Rates”,

Federal Reserve Bank of Richmond Economic Review, March/April.