Files
Abstract
The level of and movements in interest rates and the exchange rate can have a
substantial impact on the economic performance of Australia's primary industries.
Whether a country and/or exchange risk premium has resulted in higher interest
rates and increased volatility in the exchange rate is therefore important to these
industries. There is some evidence that a small country risk premium may have
emerged during the early 1990s. In line with earlier studies, however, no evidence
was found of such a premium during the 1980s. A further finding is that any
exchange risk premium may have declined over the last decade or so. Possible
links between risk premia and Australia's foreign debt and current account deficits
are also examined.