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The effect of political and bureaucratic regime changes on Australia's real interest rate

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  • Mishra, Ankita
  • Moosa, Imad A.
  • Tawadros, George B.
  • Mishra, Vinod

Abstract

We attempt to find out if changes in political and bureaucratic regimes lead to significant mean shifts in the Australian short-term real interest rate, using quarterly data for the period 1970:3 to 2019:1. Utilising a sophisticated structural break test, three distinct structural breaks are found in Australia's real interest rate. The empirical results show that a model estimated to consider the shifts in the political regime explains more of the variation in the real interest rate compared to a model that incorporates shifts in the bureaucratic regime. Results from several non-nested model selection tests also confirm this finding.

Suggested Citation

  • Mishra, Ankita & Moosa, Imad A. & Tawadros, George B. & Mishra, Vinod, 2023. "The effect of political and bureaucratic regime changes on Australia's real interest rate," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 124-136.
    • Handle: RePEc:eee:reveco:v:85:y:2023:i:c:p:124-136
    DOI: 10.1016/j.iref.2023.01.016
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    More about this item

    Keywords

    Political regimes; Bureaucratic regimes; Real interest rate; Australia;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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