Search: Real interest rate
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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MARTIN Has Its Place: A Macroeconometric Model of the Australian Economy
1 Aug 2019
RDP
2019-07
Examples include interest rates, the exchange rate, the expenditure components of real GDP, labour market variables and inflation. ... We proxy for the latter with the real mortgage interest rate, which captures the tendency for loan-to-valuation ratios
https://www.rba.gov.au/publications/rdp/2019/2019-07/full.html
Core Equations
23 Aug 2019
RDP
2019-07
We proxy for the latter with the real mortgage interest rate, which captures the tendency for loan-to-valuation ratios to increase when real mortgage rates decline. ... R. t. ). α. 1. N. 2. R. t. 1. Real interest rate measures appear in many of MARTIN's
https://www.rba.gov.au/publications/rdp/2019/2019-07/core-equations.html
What is MARTIN and What is it Used for?
23 Aug 2019
RDP
2019-07
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
Model Dynamics
23 Aug 2019
RDP
2019-07
In the line labelled ‘No exchange rate channel’ we impose the same interest rate path, but hold the real exchange rate fixed at its initial level. ... In the absence of offsetting positive developments, the lower inflation and higher unemployment
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
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
References
23 Aug 2019
RDP
2019-07
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
Conclusion
23 Aug 2019
RDP
2019-07
But while fulfilling these tasks is important, the real test of a model is that it gets used. ... 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
https://www.rba.gov.au/publications/rdp/2019/2019-07/conclusion.html
A Stylised Description of the Model
23 Aug 2019
RDP
2019-07
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