Research Discussion Paper – RDP 9111 Monthly Movements in the Australian Dollar and Real Short-Term Interest Differentials: An Application of the Kalman Filter

Contents

• Introduction
• Approaches to the Determination of Short-Term Movements in the Real Exchange Rate
• The Structural Model: Specification
• Econometric Methodology
• Estimation Results
• Assessments and Conclusions
• Appendix 1: Data Methods and Sources
• Appendix 2: Our Estimation Procedure – A Flow Chart
• References

We are grateful to colleagues at the RBA for helpful comments, especially Jerome Fahrer. We are grateful to Martin Parkinson for his copy of the Kalman filter program and for suggestions on preliminary drafts of our paper. We also thank Howard Doran and Colin Hargreaves for their comments on the econometric methodology. Any errors are ours alone. The views expressed herein are those of the authors and do not necessarily reflect the views of the Reserve Bank of Australia.