The US Interest Rate Conundrum and its Implications for Australia

Abstract

The project generalises existing factor models of interest rates. The project will result in several benefits nationally as well as internationally. As U.S. interest rates and U.S. monetary policy in general are important determinants of interest rates in Australia, the project will lead to an improved understanding of the international mechanism linking interest rates. This will also provide a better framework in which to understand and monitor monetary policy in Australia. An important aspect of the project is the development of new testing procedures that improve upon existing nonparametric methods.