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The Steady Inflation Rate of Economic Growth

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  • Mardi Dungey
  • John Pitchford

Abstract

This paper considers the existence of a path of GDP corresponding to steady inflation in the prices of domestic goods. We estimate the steady inflation rate of growth, denoted the SIRG, at a little over 4 per cent per annum in the post-float period. Changes in inflation are modelled as a nonlinear combination of growth and changes in import price inflation. Because import price inflation is more volatile than overall inflation, policy that targets overall inflation may require growth to fluctuate considerably, whereas growth can be steady if the target is steady inflation of domestic goods' prices.

Suggested Citation

  • Mardi Dungey & John Pitchford, 1999. "The Steady Inflation Rate of Economic Growth," CEPR Discussion Papers 414, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:414
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP414.pdf
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    References listed on IDEAS

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    Cited by:

    1. David Gruen & Tim Robinson & Andrew Stone, 2005. "Output Gaps In Real Time: How Reliable Are They?," The Economic Record, The Economic Society of Australia, vol. 81(252), pages 6-18, March.
    2. Mardi Dungey & John Pitchford, 2001. "An Empirical Analysis of the Effect of Growth on Inflation, Australia, Canada and the United States," CEPR Discussion Papers 438, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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    More about this item

    Keywords

    inflation; growth ; import prices; monetary policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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