RDP 9601: Why Does the Australian Dollar Move so Closely with the Terms of Trade? Appendix D: Data

The terms of trade, defined as the ratio of the implicit price deflators for exports of goods and services to imports of goods and services, are from Table H.3 in the Reserve Bank of Australia (RBA) Bulletin Database.

Nominal bilateral exchange rates are end of quarter 4 pm (Sydney) quotations, from Table F.9 of the RBA Bulletin Database.

Consumer Price Index (CPI) data is of quarterly frequency and obtained from the International Monetary Fund's International Financial Statistics (IFS) database. For Australia, the ‘Medicare adjusted’ CPI series is used.

Nominal one and two year interest rates at the end of quarter t are the daily rates prevailing on the next day (ie, the first day of quarter t+1).^[11]

The following one-year nominal interest rates are obtained from Datastream. Japan: 1 year London euro-yen rate; United States: 1 year treasury bill rate; United Kingdom: 1 year interbank rate; New Zealand: 1 year interbank rate; Germany: 1 year treasury bond rate; Australia: 1 year interbank rate.

The two-year nominal interest rates are defined as follows. Japan: linear interpolation of the 7 year Japanese bond rate and 1 year London euro-yen rate; United States: 2 year US treasury bond rate; UK: linear interpolation of the 5 year gilt rate and 1 year interbank rate; NZ: 2 year government bond rate (from 1987:Q1–1992:Q3), thereafter, a linear interpolation of the 5 year government bond and 1 year interbank rate; Germany: 2 year German bond rate; Australia: 2 year Commonwealth Government bond rate.

Footnote

As reported above, we use nominal exchange rates at the end (4pm) of the last day of quarter t. Since one and two year interest rates change very little from one day to the next, interest rates prevailing on the next day, which are readily available, are satisfactory for our purposes. [11]