Treasury Note and Bank Bill Rates, the Risk Premium and Australian Monetary Policy
Access status:
Open Access
Type
Working PaperAbstract
This paper examines a link in the Australian monetary transmission mechanism based on the risk structure of certain interest rates. The bank-accepted bill and Treasury note rates cointegrate, and formal tests indicate that the risk premium was stationary after, but nonstationary ...
See moreThis paper examines a link in the Australian monetary transmission mechanism based on the risk structure of certain interest rates. The bank-accepted bill and Treasury note rates cointegrate, and formal tests indicate that the risk premium was stationary after, but nonstationary before, the end of 1990. Well-defined and stable error-correction mechanisms also exist since December 1990, whereas prior to that they were unstable. These changes probably indicate a reduction in uncertainty and instability associated with the conduct of monetary-policy. The evidence also indicates that, since December 1990, the Reserve Back has been able to influence the bill rate by targeting the note rate.
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See moreThis paper examines a link in the Australian monetary transmission mechanism based on the risk structure of certain interest rates. The bank-accepted bill and Treasury note rates cointegrate, and formal tests indicate that the risk premium was stationary after, but nonstationary before, the end of 1990. Well-defined and stable error-correction mechanisms also exist since December 1990, whereas prior to that they were unstable. These changes probably indicate a reduction in uncertainty and instability associated with the conduct of monetary-policy. The evidence also indicates that, since December 1990, the Reserve Back has been able to influence the bill rate by targeting the note rate.
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Date
1995-02-01Publisher
Department of EconomicsDepartment, Discipline or Centre
EconomicsShare