Essays on Marketing of Reserve Bank of Australia Case Study

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The paper "Marketing of Reserve Bank of Australia" is a perfect example of a finance and accounting case study. The RBA is independent of the federal government in that it makes decisions regarding interest rates independently of the country’ s political process. This means it does not get instructions from the government of the day on the interest rates. This is important in ensuring that interest rates are not manipulated for political ends while keeping the monetary policy focused on its long-term goals (Reserve bank of Australia, 2013). While RBA may be independent of political influence, in theory, it would be prudent to ensure that its six non-executive directors do not come from for profit-making organizations.

This would ensure total independence and eliminate bias that would arise for economic reasons. If the supply of money is increased, the level of interest rates lower. It should be noted that money also follows the law of demand and supply. The interest rate is the price of borrowing money. This price is influenced by the laws of demand and supply implying that when the supply of money increases, more money will be available for borrowing hence forcing the lending institutions to reduce the price of borrowing money (Johannes, 2010).

The vice versa will happen when the supply is reduced until an equilibrium rate is achieved where the demand for money equals the supply of money. Historically, the yield curve has been typically upward sloping. I would expect this to be the case due to the market’ s anticipation of a rise in the risk-free rate. If investments are held now, better rates are expected in the future to compensate for the invested money.

In addition, investments with longer maturity dates imply a greater risk for the investor. As such, a risk premium will be needed for the associated risk. Furthermore, economic recessions have always been much shorter than economic expansions. This means that long-term investors would anticipate higher interests to arise from expansion periods. The following are the characteristics of money market instruments Liquidity – this is how fast investors are able to access their money and hence a money market instrument should be relatively liquid.

References

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Reserve bank of Australia, 2013, About monetary policy, Retrieved on 9th January 2014, From;

http://www.rba.gov.au/monetary-policy/about.html

Johannes, B2010, Effects of a price level increase on interest rates, International Financial Journal, vol. 102, no.3, pp.19-25.

Webber, N2001, Interest rates modeling, New York, John Willey & Sons.

Peter, G2011, Getting to understand the money market, London, Rutledge.

Shiller, B2007, Macro shocks and aggregate risk, Quarterly Journal of Economics and Finance, vol. 43, pp. 668-696.

Keith, B2006, Financial derivatives, London, Prentice Hall.

Economy watch.com, 2010, Risks in international trade, Retrieved on 9th January 2014, From;

http://www.economywatch.com/international-trade/risks.html

Sarah, p2007, Risk management, New York, John Willey & Sons.

Investing answers.com, 2013, Yield curve, Retrieved on 9th January 2014, From;

http://www.investinganswers.com/financial-dictionary/bonds/yield-curve-810

Joel, M2010, Financial regulation, Oxford, Oxford University Press.

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