We use time series techniques to examine the behaviour of Australia’s real exchange rate from 1969 to 1990. The real exchange rate exhibits non-stationary behaviour over this period, in contrast to simple purchasing power parity theory. We find weak evidence that the real exchange rate...

Over the last six years, Australia has experienced relatively high steady inflation and high real interest rates – especially short-term rates. This paper argues that these high real rates are a consequence of the interaction between the relatively high inflation and a tax system which taxes...

A risk-averse US investor adjusts the shares of a portfolio of short-term nominal domestic and foreign assets to maximize expected utility. The optimal strategy is to respond immediately to all new information which arrives weekly. We calculate the expected utility foregone when the investor...

Given essentially perfect capital mobility, Australian interest rates and the expected exchange rate change should satisify international arbitrage conditions. We examine an arbitrage condition for a US investor, with a view to explaining the large short-term real interest differential between...