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Measures of Inflation Expectations in Australia

Author

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  • Angus Moore

    (Reserve Bank of Australia)

Abstract

Inflation expectations have an important influence on wage growth and price inflation. Expectations differ across agents and time and, accordingly, the Reserve Bank monitors a range of measures. This article discusses why inflation expectations are important for inflation and economic activity, the measures that exist in Australia and various issues affecting their interpretation. The financial markets that are used to calculate some measures of inflation expectations are not particularly liquid in Australia, and the financial measures also include an inflation risk premium; these issues can affect the interpretation of movements in the series.

Suggested Citation

  • Angus Moore, 2016. "Measures of Inflation Expectations in Australia," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 23-31, December.
    • Handle: RePEc:rba:rbabul:dec2016-03
    as

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    File URL: https://www.rba.gov.au/publications/bulletin/2016/dec/pdf/rba-bulletin-2016-12-measures-of-inflation-expectations-in-australia.pdf
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    References listed on IDEAS

    as
    1. Martin D. D. Evans, 1998. "Real Rates, Expected Inflation, and Inflation Risk Premia," Journal of Finance, American Finance Association, vol. 53(1), pages 187-218, February.
    2. Richard Finlay & David Olivan, 2012. "Extracting Information from Financial Market Instruments," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 45-54, March.
    3. Richard Finlay & Sebastian Wende, 2012. "Estimating Inflation Expectations with a Limited Number of Inflation-Indexed Bonds," International Journal of Central Banking, International Journal of Central Banking, vol. 8(2), pages 111-142, June.
    4. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-436, June.
    5. Fama, Eugene F. & French, Kenneth R., 1988. "Dividend yields and expected stock returns," Journal of Financial Economics, Elsevier, vol. 22(1), pages 3-25, October.
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    Cited by:

    1. Benjamin Beckers & Anthony Brassil, 2022. "Inflation Expectations in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 125-135, March.
    2. Dzmitry Kruk, 2016. "SVAR Approach for Extracting Inflation Expectations Given Severe Monetary Shocks: Evidence from Belarus," BEROC Working Paper Series 39, Belarusian Economic Research and Outreach Center (BEROC).
    3. Kim, Young Min & Kang, Kyu Ho & Ka, Kook, 2020. "Do bond markets find inflation targets credible? Evidence from five inflation-targeting countries," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 66-84.
    4. Baumann, Ursel & Darracq Pariès, Matthieu & Westermann, Thomas & Riggi, Marianna & Bobeica, Elena & Meyler, Aidan & Böninghausen, Benjamin & Fritzer, Friedrich & Trezzi, Riccardo & Jonckheere, Jana & , 2021. "Inflation expectations and their role in Eurosystem forecasting," Occasional Paper Series 264, European Central Bank.
    5. Viet H. Nguyen & Tim Robinson & Sarantis Tsiaplias, 2022. "The Australian Economy in 2021–2022: The Virus Strikes Back," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 5-24, March.
    6. Gozluklu, Arie & Morin, Annaïg, 2019. "Stock vs. Bond yields and demographic fluctuations," Journal of Banking & Finance, Elsevier, vol. 109(C).

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    Keywords

    inflation expectations; Australia;

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