Bank exposures to interest-rate risk: the case of the Australian banking industry

Robert Faff and P. F. Howard

Applied Economics Letters, 1997, vol. 4, issue 12, 737-739

Abstract: This paper provides evidence of the changing nature of interest-rate sensitivity of a banking and finance portfolio in Australia over the period 1978-1992. Specifically, the potential sensitivity to short- and long-term interest rate movements is examined in each of three subperiods (1978-1982, 1983-1987 and 1988-1992). Consistent with previous US evidence, our major finding is that the banking portfolio exhibits sensitivity only to long-term interest rates. However, this sensitivity is significant only during the middle subperiod - a time when Australian financial markets experienced dramatic deregulatory changes including the floating of the domestic currency.

Date: 1997
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DOI: 10.1080/758528718

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