A Markov-switching Model of Inflation in Australia
AbstractThis paper applies the methodology of Markov-switching models to describe the inflation process in Australia in the period since the early 1960s. In contrast to conventional modelling, the approach makes explicit allowance for the possibility of structural change: inflation is modelled within a framework that allows endogenous switching between simple inflation equations. The approach may be relevant to understanding shifts in inflation expectations if the public also uses relatively simple forecasting rules in formulating expectations. The results suggest that inflation is reasonably well represented by relatively simple functions of past inflation and an output gap term, with major regime changes occurring in the early 1970s and early 1990s.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9611.
Date of creation: Dec 1996
Date of revision:
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- O56 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Oceania
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Piotr Białowolski & Dawid Żochowski & Piotr Zwiernik, 2011. "Modelling Inflation Using Markov Switching Models: Case of Poland, 1992 – 2005," Prace i Materiały Instytutu Rozwoju Gospodarczego, Instytut Rozwoju Gospodarczego, Szkoła Główna Handlowa, vol. 86(1), pages 185-199, January.
- Neil Dias Karunaratne & Ramprasad Bhar, 2010. "Regime-Shifts & Post-Float Inflation Dynamics In Australia," Discussion Papers Series 405, School of Economics, University of Queensland, Australia.
- Yucel, Eray, 2011. "A Review and Bibliography of Early Warning Models," MPRA Paper 32893, University Library of Munich, Germany.
- Besso, Christophe Raoul, 2010. "Phillips Curve, case study in Cameroon: evaluation of fundamental assumptions," MPRA Paper 35614, University Library of Munich, Germany, revised 28 Dec 2011.
- Fady Barsoum & Sandra Stankiewicz, 2013. "Forecasting GDP Growth Using Mixed-Frequency Models With Switching Regimes," Working Paper Series of the Department of Economics, University of Konstanz 2013-10, Department of Economics, University of Konstanz.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paula Drew).
If references are entirely missing, you can add them using this form.