THE INFORMATION-CONTENT OF THE YIELD CURVE IN AUSTRALIA

This paper examines the expectation theory of the term structure of in terest rates in Australia. Bivariate vector autoregressive (VAR) analy sis indicates that the spreads between the long-term and the short-ter m rates are informative about changes in short rates. Moreover, the sp read between the short-term rate and the official cash rate Granger-ca uses changes in the cash rate. These findings imply that the monetary authorities could influence long-term rates by intervening on the offi cial cash rate. The results of the efficient market restrictions tests are sensitive to the information set and the frequency of the data us ed.