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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.

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MARTIN Has Its Place: A Macroeconometric Model of the Australian Economy

1 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
Examples include interest rates, the exchange rate, the expenditure components of real GDP, labour market variables and inflation. ... price growth, growth in the dwelling stock, changes in mortgage interest rates and the rate of inflation.
https://www.rba.gov.au/publications/rdp/2019/2019-07/full.html

Core Equations

23 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
price growth, growth in the dwelling stock, changes in mortgage interest rates and the rate of inflation. ... Changes in the cash rate influence economic activity and inflation largely through their effect on other interest rates in the economy.
https://www.rba.gov.au/publications/rdp/2019/2019-07/core-equations.html

Model Dynamics

23 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
In the absence of offsetting positive developments, the lower inflation and higher unemployment rate this implies could lead to a reduction in interest rates. ... Therefore, the particular cash rate path that we consider involves a 75 basis point
https://www.rba.gov.au/publications/rdp/2019/2019-07/model-dynamics.html

MARTIN Has Its Place: A Macroeconometric Model of the Australian Economy

1 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
Neutral interest rate (rstar). World export price (wpx). World real 2-year interest rate (wr2r). ... World real 2-year interest rate spread to the Australian 2-year interest rate (wr2sp).
https://www.rba.gov.au/publications/rdp/2019/2019-07/read-me.html

MARTIN Has Its Place: A Macroeconometric Model of the Australian Economy

26 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
forecasting, interest rates, modelling, money. This paper introduces MARTIN – the Reserve Bank of Australia's (RBA) current model of the Australian economy.
https://www.rba.gov.au/publications/rdp/2019/2019-07.html

References

23 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
Hambur J and G La Cava (2018), ‘Do Interest Rates Affect Business Investment? ... Lane K and T Rosewall (2015), ‘Firms' Investment Decisions and Interest Rates’, RBA Bulletin, June, pp 1–7.
https://www.rba.gov.au/publications/rdp/2019/2019-07/references.html

What is MARTIN and What is it Used for?

23 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
For example, in MSM, business investment is highly sensitive to interest rates because firms seek to equate the marginal productivity of an incremental unit of capital to its user cost. ... 2007; Lane and Rosewall 2015), although Hambur and La Cava (2018)
https://www.rba.gov.au/publications/rdp/2019/2019-07/what-is-martin-and-what-is-it-used-for.html

Conclusion

23 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
RBA staff have used MARTIN scenarios to examine topics including the effects of changes in the labour force participation rate (Evans et al 2019), the consequences of changes in housing prices
https://www.rba.gov.au/publications/rdp/2019/2019-07/conclusion.html

Appendix A: Estimation of Time-varying Constants in Error Correction Equations

23 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
Because the expansion of export volumes following a permanent decrease in trade costs or tariff barriers is likely to occur gradually and at an uneven rate, it may not adequately be
https://www.rba.gov.au/publications/rdp/2019/2019-07/appendix-a.html

A Stylised Description of the Model

23 Aug 2019 RDP 2019-07
Alexander Ballantyne, Tom Cusbert, Richard Evans, Rochelle Guttmann, Jonathan Hambur, Adam Hamilton, Elizabeth Kendall, Rachael McCririck, Gabriela Nodari and Daniel Rees
Examples include interest rates, the exchange rate, the expenditure components of real GDP, labour market variables and inflation. ... The central bank adjusts interest rates to ensure that consumer price inflation equals the inflation target and the
https://www.rba.gov.au/publications/rdp/2019/2019-07/a-stylised-description-of-the-model.html