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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.

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Appendix B: A Framework for Analysis

1 Feb 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
Price. Terms of trade. Real exchange rate. World export prices. World real interest rate. ... is the real interest rate less the risk premium, and r is the real interest rate.
https://www.rba.gov.au/publications/rdp/1998/1998-03/appendix-b.html

Forward-looking Behaviour and Credibility: Some Evidence and Implications for Policy

1 Aug 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
Research Discussion Papers contain the results of economic research within the Reserve Bank
https://www.rba.gov.au/publications/rdp/1998/9803.html

Policy Implications

1 Feb 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
Since the exchange rate depends on current and future real interest rates, it jumps up in response to tighter expected monetary policy. ... Under this particular policy rule, the nominal and real interest rates do not rise immediately to their respective
https://www.rba.gov.au/publications/rdp/1998/1998-03/policy-implications.html

Appendix C: The Effect of Different Interest Rate Assumptions

1 Feb 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
Download the Paper 344. KB. This appendix sets out an example to show the effect on the variability of interest rates of different interest rate assumptions in forward-looking monetary policy ... If policy-makers are assumed to keep real, rather than
https://www.rba.gov.au/publications/rdp/1998/1998-03/appendix-c.html

Conclusions

1 Feb 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
We have three main conclusions. First, inflation and output are substantially less variable when policy-makers are forward looking, setting interest rates using model-consistent expectations of inflation and the output ... Also, in the simple model we use
https://www.rba.gov.au/publications/rdp/1998/1998-03/conclusions.html

Introduction

1 Feb 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
If inflation is higher than expected, financial markets will expect higher future real interest rates and an appreciation of the exchange rate (all else given) if they believe that the central ... Moreover, when groups of people in the economy form their
https://www.rba.gov.au/publications/rdp/1998/1998-03/introduction.html

Evidence on the Formation of Inflation Expectations

1 Feb 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
In a rational market, foreign exchange market participants anticipate the higher real interest rates, and the exchange rate may appreciate in response to the positive inflation surprise. ... The exchange rate now systematically moves in the same
https://www.rba.gov.au/publications/rdp/1998/1998-03/evidence-on-the-formation-of-inflation-expectations.html

References

1 Feb 1998 RDP 9803
Gordon de Brouwer and Luci Ellis
19–33. Gruen, D. and J. Wilkinson (1991), ‘Australia's Real Exchange Rate – Is It Explained by the Terms of Trade or by Real Interest Differentials?’, Reserve Bank of Australia Research ... 210. Lowe, P. and L. Ellis (1997), ‘The Smoothing of
https://www.rba.gov.au/publications/rdp/1998/1998-03/references.html