Research Discussion Paper – RDP 14 A Model of the Market for Australian Government Securities

Introduction

Despite the importance in most countries of Government securities as a financial asset, surprisingly little empirical work has been done on the market for such securities. This is, for example, the case in Australia, where total domestic holdings of Commonwealth securities including Treasury Notes exceed 10,000 million. It is the aim of this paper to examine demand (and supply) functions for these securities in an attempt to construct a model appropriate to the non-official private sector holdings. The paper is structured as follows:-

1. Some theoretical considerations.
2. A comment on the Australian government securities market.
3. Data and notation.
4. An aggregate demand function.
5. Disaggregation by sectors.
6. Alternative forms of disaggregation.
7. The supply function.
8. Conclusion.