This paper tests the response of bond yield spreads and equity prices to credit rating changes in the Australian financial market. Unlike some earlier studies for foreign markets, we find evidence that both yield spreads and equity prices move in the ‘expected’ direction following rating...

In this paper we estimate the effect of particular price incentives on consumer payment patterns using transaction-level data. We find that participation in a loyalty program and access to an interest-free period, both of which lower the price of credit card use, tend to increase credit card use...

The 2000s was a particularly eventful decade for both the international and Australian economies. There were: two recessions in many countries; the largest international financial crisis since the Great Depression; the ongoing rapid development of Asia; asset booms and busts; and, Australia...

Whether people form their expectations of the future in a model-consistent or extrapolative manner, has implications for the way the economy and monetary policy are modelled. The first half of this paper provides three pieces of information about inflation expectations – that survey measures...

This paper studies two types of interest rate rules that involve long-term nominal interest rates in the context of a New Keynesian model. The first type considers the possibility of adding longer-term rates to the list of variables the central bank reacts to in setting its short-term rate. The...

In January 1990, the Reserve Bank of Australia (RBA) began announcing and explaining changes in the target cash rate. This has increased public understanding of monetary policy and, by increasing the attention given to changes in interest rates, has affected the way in which changes in policy...

Since the float of the Australian dollar in December 1983, the Reserve Bank of Australia (RBA) has retained the discretion to intervene in the foreign exchange markets in order to avoid what it perceives to be large overshooting in the currency. In this paper we invoke the ‘profit test’...

This paper investigates the merits of aggregate inflation targeting compared with non-traded inflation targeting using a model of a small open economy producing traded and non-traded goods. An important innovation of our approach is that we isolate the effects of exchange rate, supply and demand...

The decline in output volatility in a number of countries over the past few decades has been well-documented, though less agreement has been reached about the causes of this decline. In this paper, we use a panel of data from 20 OECD countries to see if there is a role for various indicators of...

In this paper we analyse the effect of news relating to the expected path of monetary policy on interest rate futures. Central banks’ transparency is in most respects much greater than it was a decade ago, and so central bank communication needs to be included as a potential source of news. We...