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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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Australia's Real Exchange Rate – Is it Explained by the Terms of Trade or by Real Interest Differentials?

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
Research Discussion Papers contain the results of economic research within the Reserve Bank
https://www.rba.gov.au/publications/rdp/1991/9108.html

Methodology

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
where. k. R. t. is the domestic real interest rate of maturity k at period t, and. ... Mishkin (1987) agrees with their conclusions and states even more strongly that “research on the linkage between real interest rates and the exchange rate based on
https://www.rba.gov.au/publications/rdp/1991/9108/methodology.html

Data Appendix

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
Real interest rates are calculated by adjusting annualised nominal interest rates for annualised inflationary expectations. ... Short Nominal Interest Rates. US, UK, Japan and Germany – 3 month Eurocurrency rates taken at last trading day of month from
https://www.rba.gov.au/publications/rdp/1991/9108/data-appendix.html

Results

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
As the Table shows, over the full sample period there is no strong evidence that the real exchange rate is cointegrated with either real interest rate differential, and the coefficient estimates ... By contrast, there is very strong evidence of
https://www.rba.gov.au/publications/rdp/1991/9108/results.html

Australia's Real Exchange Rate – Is it Explained by the Terms of Trade or by Real Interest Differentials?

1 Sep 1991 RDP 9108
David W. R. Gruen and Jenny Wilkinson
https://www.rba.gov.au/publications/rdp/1991/9108/

References

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
Campbell, J.Y. and R.H. Clarida (1987), “The Dollar and Real Interest Rates”, Carnegie-Rochester Conference Series on Public Policy, 27: 103–140. ... Mishkin, F.S. (1987), “The Dollar and Real Interest Rates: A Comment”, Carnegie-Rochester
https://www.rba.gov.au/publications/rdp/1991/9108/references.html

The Stylised Facts

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
RDP 9108: Australia's Real Exchange Rate – Is it Explained by the Terms of Trade or by Real Interest Differentials? ... These graphs provide some evidence that in the most recent period, relatively high Australian real interest rates have tended to
https://www.rba.gov.au/publications/rdp/1991/9108/stylised-facts.html

Introduction

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
RDP 9108: Australia's Real Exchange Rate – Is it Explained by the Terms of Trade or by Real Interest Differentials? ... In this paper we assess empirically whether, over the time periods we consider, Australia's real exchange rate is explained by the
https://www.rba.gov.au/publications/rdp/1991/9108/introduction.html

Discussion and Conclusions

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
increase of 1 percentage point in the differential between Australian and world long real interest rates is associated with an appreciation of the Australian real exchange rate of about 2 to ... These different roles for short interest rates presumably
https://www.rba.gov.au/publications/rdp/1991/9108/discussion-and-conclusions.html

Appendix

1 Sep 1991 RDP 9108
David W.R. Gruen and Jenny Wilkinson
RDP 9108: Australia's Real Exchange Rate – Is it Explained by the Terms of Trade or by Real Interest Differentials?
https://www.rba.gov.au/publications/rdp/1991/9108/appendix.html