Australian monetary growth and short-term nominal interest rates: An interest parity, efficient markets approach

Layton A.P. (1990) Australian monetary growth and short-term nominal interest rates: An interest parity, efficient markets approach. Applied Economics, 22 8: 1119-1126. doi:10.1080/00036849000000139


Author Layton A.P.
Title Australian monetary growth and short-term nominal interest rates: An interest parity, efficient markets approach
Journal name Applied Economics   Check publisher's open access policy
ISSN 1466-4283
Publication date 1990-01-01
Sub-type Article (original research)
DOI 10.1080/00036849000000139
Open Access Status
Volume 22
Issue 8
Start page 1119
End page 1126
Total pages 8
Subject 2002 Cultural Studies
Abstract The relationship between monetary growth and nominal interest rates continues to attract considerable attention in the literature. Mishkin (1982) has found that, by explicitly imposing market efficiency in an interest rate model for the US, empirical analysis does not support the ‘Keynesian’ proposition that increases in monetary growth are associated with reductions in short-term rates. In this paper a similar theoretical structure is used but, unlike Mishkin, explicit account is taken of the fact that Australia's capital market is closely integrated with international money markets. Incorporating this into the interest rate model indicates there is some empirical support for the ‘Keynesian’ proposition in the Australian case. The analytical model also incorporates a measure of interest rate volatility to account for the risk premium present in the forward rate for 90 day bank bills.
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Unknown

Document type: Journal Article
Sub-type: Article (original research)
Collection: Scopus Import - Archived
 
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