RDP 8906: A Random Walk Around the $A: Expectations, Risk, Interest Rates and Consequences for External Imbalance Data Appendix:

Exchange rate data

Dataset A: Weekly (Friday) exchange rates, 5 Jan 79 to 21 Apr 89.

The spot rate, one month forward rate, and three month forward rate for the $A/$US market and the Australian trade-weighted index (TWI) are from I. P. Sharp Associates ‘Australian Financial Markets Data Base’. The first three of these series are, in turn, from the Commonwealth Bank of Australia, and are the average of buy and sell rates at the close of trade on each Friday. The TWI is from the Reserve Bank of Australia (RBA) at 4 p.m. The spot rates $US/¥, $US/£, $US/DM, $US/$C are from I. P. Sharp Associates ‘Currency Exchange Rates Data Base’, and are the noon buying price in $US in New York. These data are from the Federal Reserve System, N.Y. Bank.

Dataset B: Daily exchange rates, 1 Jan 86 to 11 Apr 89.

Rates are the daily representative rates from the RBA for $US/$A, ¥/$A, £/$A, DM/$A, and the TWI.

For both datasets, cross-rates are derived by dividing the appropriate rates (e.g., for dataset B, ¥/£ is derived as [¥/$A]/[£/$A]).

Survey data on exchange rate expectations

“An attempt was made to contact the same individual each week, however if the usual respondent was unavailable then [foreign exchange] expectations would be elicited from an alternative forecaster. This method of survey guaranteed a high response rate.” (Hunt, 1987). The sixteen companies in the survey were: A.N.Z. Bank, B.N.P., The Australian Bank, Barclays, B.A., B.T., Citicorp, Commonwealth Bank, Elders, Lloyds, Macquarie Bank, National Australia Bank, Rural and Industry Bank, Schroders, State Bank of N.S.W. and Westpac. Each Friday, we have the lowest, the highest, and the arithmetic mean expectation of the sixteen participants. The expectations data runs from Friday 8 Mar 85 to Friday 18 Sept 87, with five missing weeks: leaving 128 weeks of data. The regressions and figures in this section require spot and forward rates for the $US/$A. We use the Friday close spot rate in the wholesale market, and the Friday one month forward average of buy and sell rates (quoted in the Australian Financial Review on the following Monday).

The data for section IV comes from these sources: 3 month Treasury bill interest rates and 10 year bond rates for the US and Australia as well as Australian CPI, net external debt and terms of trade are from RBA Bulletins (various issues). Other short-term interest rates and foreign CPI are from IMF International Financial Statistics (IFS). To evaluate ex post 3 month real interest rates, we used the average yield on Australian 3 month Treasury bills for the last tender in each quarter (from RBA Bulletin), and the quoted yield on 3 month US Treasury bills on the last trading day of the quarter (from the New York Times) along with realised CPI inflation over the next 3 months.