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RBA Glossary definition for Real interest rate

Real interest rate – The real interest rate refers to the cost of borrowing money (i.e. the nominal interest rate) net of inflation. It takes account of the fact that part of the nominal interest that borrowers pay to lenders represents compensation for anticipated inflation. The remaining �real� component better reflects the economic cost of borrowing and the return to lending.

RBA Glossary definition for interest rate

interest rate – The term used to describe the cost of borrowing money or the return to the owner of the funds which are invested or lent out. It is usually expressed as a percent per annum of the amount of money borrowed, lent or invested.

Search Results

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

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
Research Discussion Paper – RDP 9111 Monthly Movements in the Australian Dollar and Real Short-Term Interest Differentials: An Application of the Kalman Filter.
https://www.rba.gov.au/publications/rdp/1991/9111/

Approaches to the Determination of Short-Term Movements in the Real Exchange Rate

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
the highest real rates of interest) as the dominant explanator of exchange rates in the shorter-term. ... Meese and Rogoff (1988), investigating the case for the US, find little empirical evidence to support the existence of any stable relationship
https://www.rba.gov.au/publications/rdp/1991/9111/approaches-to-the-determination-of-short-term-movements-in-the-real-exchange-rate.html

Introduction

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
In particular, the relationship between the real exchange rate and real interest rates has fallen under scrutiny since the late 1980s. ... Over this period in Australia, real interest rates have generally been high relative to our major trading partners.
https://www.rba.gov.au/publications/rdp/1991/9111/introduction.html

Econometric Methodology

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
t. (the real exchange rate, q. t. , and the ex post real interest differential, d. ... See Fama and Gibbons (1982) for other working to show that if ex ante real interest rates follow a univariate AR(1), then ex post real rates must follow a univariate
https://www.rba.gov.au/publications/rdp/1991/9111/econometric-methodology.html

Assessments and Conclusions

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
This result does not deny the existence of a weak short-run relationship between Australia's real exchange rate and real interest rate relative to that of the rest of the ... As in their study, little role is found for real interest differentials in real
https://www.rba.gov.au/publications/rdp/1991/9111/assessments-and-conclusions.html

The Structural Model: Specification

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
t. apart from the real interest differential. One way of accessing real interest rate data is to use long-term (typically ten-year) real interest rates across countries. ... Furthermore, the use of ex post long-term real interest rates truncates the
https://www.rba.gov.au/publications/rdp/1991/9111/structural-model-specification.html

Estimation Results

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
Sample means are negative across the board, indicating that real interest rates were higher on average in Australia than overseas. ... the level of Australia's real interest rates relative to the rest of the world ceteris paribus, exerts some small
https://www.rba.gov.au/publications/rdp/1991/9111/estimation-results.html

References

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
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. ... 95, February. Mishkin, F.S. (1987), “The Dollar and Real Interest Rates – A Comment”
https://www.rba.gov.au/publications/rdp/1991/9111/references.html

Monthly Movements in the Australian Dollar and Real Short-term Interest Differentials: An Application of the Kalman Filter

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
Research Discussion Papers contain the results of economic research within the Reserve Bank
https://www.rba.gov.au/publications/rdp/1991/9111.html

Appendix 1: Data Methods and Sources

1 Nov 1991 RDP 9111
Alison Tarditi and Gordon Menzies
A trade-weighted interest rate is constructed using the weights described above for the trade-weighted exchange rate index. ... p. d,t. is the ratio of foreign to domestic CPIs. Ex post real interest differentials are constructed by subtracting the
https://www.rba.gov.au/publications/rdp/1991/9111/appendix-1.html