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Monetary Policy Goals for Inflation in Australia

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Author Info
Guy Debelle (Reserve Bank of Australia)
Glenn Stevens (Reserve Bank of Australia)

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Abstract

This paper outlines the inflation objective for monetary policy in Australia, which we describe as seeking to achieve a broad central tendency for inflation of between 2 and 3 per cent over the long run - a "thick point" - rather than a narrow target band. It also provides a more detailed rationale for this objective. In doing so, the paper discusses the issues relevant in determining the appropriate mean inflation rate at which policy should aim, the degree of variation of inflation around that central point, and how policy should respond to shocks. A simple model of the economy is presented which attempts to address these issues in a consistent framework.

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Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9503.

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Date of creation: Mar 1995
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Handle: RePEc:rba:rbardp:rdp9503

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Richard de Abreu Lourenco & David Gruen, 1995. "Price Stickiness and Inflation," RBA Research Discussion Papers rdp9502, Reserve Bank of Australia. [Downloadable!]
  2. David Gruen & Geoffrey Shuetrim, 1994. "Internationalisation and the Macroeconomy," RBA Annual Conference Volume, in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia. [Downloadable!]
  3. David E. Lebow & John M. Roberts & David J. Stockton, 1992. "Economic performance under price stability," Working Paper Series / Economic Activity Section 125, Board of Governors of the Federal Reserve System (U.S.).
  4. Summers, Lawrence, 1991. "How Should Long-Term Monetary Policy Be Determined? Panel Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 625-31, August. [Downloadable!] (restricted)
  5. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82. [Downloadable!] (restricted)
  6. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
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  7. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September. [Downloadable!] (restricted)
  8. Adam Posen, 1995. "Central bank independence and disinflationary credibility: a missing link?," Staff Reports 1, Federal Reserve Bank of New York. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stanley Fischer, 1996. "Why are central banks pursuing long-run price stability?," Proceedings, Federal Reserve Bank of Kansas City, pages 7-34. [Downloadable!]
  2. Palle Andersen & David Gruen, 1995. "Macroeconomic Policies and Growth," RBA Research Discussion Papers rdp9507, Reserve Bank of Australia. [Downloadable!]
  3. Tor Jacobson & Per Jansson & Anders Vredin & Anders Warne, 2001. "Monetary policy analysis and inflation targeting in a small open economy: a VAR approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(4), pages 487-520. [Downloadable!]
  4. Scott Roger, 1998. "Core inflation: concepts, uses and measurement," Reserve Bank of New Zealand Discussion Paper Series G98/9, Reserve Bank of New Zealand. [Downloadable!]
  5. Gordon de Brouwer & Luci Ellis, 1998. "Forward-looking Behaviour and Credibility: Some Evidence and Implications for Policy," RBA Research Discussion Papers rdp9803, Reserve Bank of Australia. [Downloadable!]
  6. Guy Debelle, 1999. "Inflation Targeting and Output Stabilisation," RBA Research Discussion Papers rdp1999-08, Reserve Bank of Australia. [Downloadable!]
  7. Álvaro Almeida, 2003. "40 Years of Monetary Targets and Financial Crises in 20 OECD Countries," FEP Working Papers 128, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  8. David Mayes & Brendon Riches, 1996. "The effectiveness of monetary policy in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 59, March. [Downloadable!]
  9. Frederic S. Mishkin & Klaus Schmidt-Hebbel, 2001. "One decade of inflation targeting in the world : What do we know and what do we need to know?," Working Papers Central Bank of Chile 101, Central Bank of Chile. [Downloadable!]
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  10. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy Rules for Inflation Targeting," NBER Working Papers 6512, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Richard Dennis, 1997. "Bandwidth, bandlength, and inflation targeting: some observations," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 60, March. [Downloadable!]
  12. Jacobson, Tor & Jansson, Per & Vredin, Anders & Warne, Anders, 1999. "A VAR Model for Monetary Policy Analysis in a Small Open Economy," Working Paper Series 77, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
  13. Gordon de Brouwer, 1998. "Estimating Output Gaps," RBA Research Discussion Papers rdp9809, Reserve Bank of Australia. [Downloadable!]
  14. Malcolm Edey & John Romalis, 1996. "Issues in Modelling Monetary Policy," RBA Research Discussion Papers rdp9604, Reserve Bank of Australia. [Downloadable!]
  15. St-Amant, Pierre & Tessier, David, 1998. "Résultats empiriques multi-pays relatifs à l'impact des cibles d'inflation sur la crédibilité de la politique monétaire," Working Papers 98-23, Bank of Canada. [Downloadable!]
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