RDP 8401: The Equations of the RBA82 Model of the Australian Economy I. Introduction

This paper sets out the estimating equations of the most recent version of the RBII model of the Australian economy; this version is called RBA82. It is estimated on data from 1959 to 1980, and does not attempt to model structural changes that have taken place in the Australian economy since 1982. It is, however, used as the starting point for the study of the recent changes in financial markets by Fahrer and Rankin (1984). The name RBA82 is used for the estimated model to differentiate it from the simulation model used in this later work.

Section II describes the individual equations and their derivations. Since the first such description,^[1] many aspects of the model have altered: the monetary transmission mechanism, to incorporate several short-term interest rates and a more complex specification for capital flows; the equations for factor demands; the treatment of expectations, by the introduction of expected sales; the modelling of taxes; and the treatment of farm product. Section III evaluates the fit of the model.

There are two appendices. The first lists the model equations and parameter estimates; the second details the techniques applied in order to estimate the model with (discrete) quarterly data.

Footnote

Jonson, Moses and Wymer (1976) presented and described the structure of the first version of the model, called RBA76. This version was examined at a conference held in 1977, the proceedings of which are reported in Norton, ed. (1977). A second version of the model was presented and applied to simulation analysis in Jonson and Trevor (1979), and Jonson, McKibbin and Trevor (1981, 1982). [1]