RDP 9410: An Empirical Examination of the Fisher Effect in Australia Appendix B: Data

The analysis makes use of quarterly data on inflation rates and thirteen week Treasury note interest rates for the period from the third quarter of 1962 until the fourth quarter of 1993. The sample starts with the third quarter of 1962 because this is the first date that data on Treasury notes are consistently available. The CPI data are an average over the quarter so the Treasury note interest rate data are also averaged over the quarter. The Treasury note data were obtained from the Reserve Bank of Australia Bulletin for data covering 1962 III to 1982 II. Over this period the monthly observations reported in the Bulletin are averaged.^[15] Thereafter internal sources are used to construct the quarterly averages using daily data. The inflation data are the headline CPI rate adjusted for Medibank and the introduction of the Medicare levy.^[16] The timing of the variables is as follows. For a first quarter observation the interest rate is the average of the Treasury note interest rates over the quarter, while the inflation rate is calculated from the first and second quarter CPI data.

Footnotes

These observations are based upon the average yield of the last tender of the month. [15]

The headline CPI which is used to construct the inflation variable suffers from an inappropriate treatment of the housing component and, in addition, includes volatile components such as fuel and energy. As a result we have also looked at results using inflation constructed from an adjusted CPI which, unfortunately, only starts after 1972 because the necessary expenditure breakdown is not available earlier. Nonetheless, we find results very similar to those found with the headline CPI series and so choose to use the headline measure as it is available over a longer time horizon. [16]