Research Discussion Paper – RDP 9608 Modelling the Australian Exchange Rate, Long Bond Yield and Inflationary Expectations

Contents

• Introduction
• The Macroeconomic Model Approach
• A Behavioural Model of the Australian Real Exchange Rate
• A Behavioural Model of the Australian Long-Term Interest Rate
• Conclusion
• Appendix A: Data Sources
• Appendix B: The Behavioural Model of the Australian Real Exchange Rate – Integration Tests and Diagnostics
• Appendix C: The Behavioural Model of Australian Long Bond Yields – Integration Tests and Diagnostics
• References

This is a revised version of a paper prepared for the Bank for International Settlements Central Bank Econometrics Meeting, 14th–15th December 1995. I am very grateful to Lynne Cockerell and John Simon for enthusiastic research assistance. Thanks also to John Romalis for execution of the macroeconomic model simulations and to David Gruen, Philip Lowe and Malcolm Edey for drafting comments. The views expressed are those of the author and are not necessarily those of the Reserve Bank of Australia.