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The Ends of Three Small Inflations: Australia, New Zealand and Canada


  • Guy Debelle


The increase in the independence of the Reserve Bank of New Zealand in 1989 allows a test of the theoretical implications of the central bank independence literature. Furthermore, the similar inflationary experiences of Australia and Canada provide a rare set of controls. This paper shows that in the short term, the cost of disinflation have not been less in New Zealand than in Australia and that in Canada, where increased credibility was only supported by rhetoric and not legislation, the costs were higher. However, other concurrent reforms in New Zealand may have clouded the picture and the true test may be the path of inflation in the three countries as the economies continue to recover.

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  • Guy Debelle, 1996. "The Ends of Three Small Inflations: Australia, New Zealand and Canada," Canadian Public Policy, University of Toronto Press, vol. 22(1), pages 56-78, March.
  • Handle: RePEc:cpp:issued:v:22:y:1996:i:1:p:56-78

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    References listed on IDEAS

    1. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters,in: Monetary Policy, pages 155-193 National Bureau of Economic Research, Inc.
    2. Doug Hostland, "undated". "CHANGES IN THE INFLATION PROCESS IN CANADA: Evidence and Implications," Staff Working Papers 95-5, Bank of Canada.
    3. Daniel Racette & Jacques Raynauld, 1994. "Canadian Monetary Policy 1989-1993: What Were the Bank of Canada's True Actions in the Determination of Monetary Conditions?," Canadian Public Policy, University of Toronto Press, vol. 20(4), pages 365-384, December.
    4. Patricia S. Pollard, 1993. "Central bank independence and economic performance," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 21-36.
    5. Andreas Fischer, 1993. "Inflation Targeting: The New Zealand and Canadian Cases," Cato Journal, Cato Journal, Cato Institute, vol. 13(1), pages 1-27, Spring/Su.
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    Cited by:

    1. Richard H. Clarida, 2005. "Japan, China, and the U.S. Current Account Deficit," Cato Journal, Cato Journal, Cato Institute, vol. 25(1), Winter.
    2. Nicolas Sobczak, 1998. "Disinflation in Spain; The Recent Experience," IMF Working Papers 98/106, International Monetary Fund.
    3. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611.
    4. Christina D. Romer & David H. Romer, 1997. "Institutions for Monetary Stability," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 307-334 National Bureau of Economic Research, Inc.
    5. Leybourne, Stephen J. & Mizen, Paul, 1999. "Understanding the disinflations in Australia, Canada and New Zealand using evidence from smooth transition analysis," Journal of International Money and Finance, Elsevier, vol. 18(5), pages 799-816, October.
    6. Gerald Epstein, 2002. "Employment-Oriented Central Bank Policy in an Integrated World Economy: A Reform Proposal for South Africa," Working Papers wp39, Political Economy Research Institute, University of Massachusetts at Amherst.
    7. Pierre St-Amant & David Tessier, 2000. "Résultats empiriques multi-pays relatifs à l'impact des cibles d'inflation sur la crédibilité de la politique monétaire," Canadian Public Policy, University of Toronto Press, vol. 26(3), pages 295-310, September.
    8. Bernard J Laurens & Marco Arnone & Jean-François Segalotto, 2006. "The Measurement of Central Bank Autonomy; Survey of Models, Indicators, and Empirical Evidence," IMF Working Papers 06/227, International Monetary Fund.
    9. Pierre L. Siklos, 1999. "Inflation-target design: changing inflation performance and persistence in industrial countries," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 46-58.
    10. Carl E. Walsh, 1995. "Recent Central-Bank Reforms and the Role of Price Stability as the Sole Objective of Monetary Policy," NBER Chapters,in: NBER Macroeconomics Annual 1995, Volume 10, pages 237-252 National Bureau of Economic Research, Inc.
    11. Edward Nelson, 2005. "Monetary Policy Neglect and the Great Inflation in Canada, Australia, and New Zealand," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
    12. Alan S. Blinder, 2000. "Central-Bank Credibility: Why Do We Care? How Do We Build It?," American Economic Review, American Economic Association, vol. 90(5), pages 1421-1431, December.
    13. Emmanuel Carré, 2014. "The origins of inflation targeting regime: the science of central banking or the art of central bankers?," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 66, pages 127-172.
    14. Frank Smets, 1997. "Financial-asset Prices and Monetary Policy: Theory and Evidence," RBA Annual Conference Volume,in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
    15. Roderick Hill, 2000. "Real Income, Unemployment and Subjective Well-Being: Revisiting the Costs and Benefits of Inflation Reduction in Canada," Canadian Public Policy, University of Toronto Press, vol. 26(4), pages 399-414, December.
    16. Armando Méndez Morales, 1998. "Determinants of Growth in an Error; Correction Model for El Salvador," IMF Working Papers 98/104, International Monetary Fund.
    17. Perrier, Patrick, 1998. "Un examen de la crédibilité de la politique monétaire au Canada," Staff Working Papers 98-12, Bank of Canada.
    18. Richard T. Freeman & Jonathan L. Willis, 1995. "Targeting inflation in the 1990s: recent challenges," International Finance Discussion Papers 525, Board of Governors of the Federal Reserve System (U.S.).
    19. Lawrence Huiyan Zhang, 2001. "Sacrifice Ratios with Long-Lived Effects," Economics Working Paper Archive 446, The Johns Hopkins University,Department of Economics.
    20. Stephen Grenville, 1997. "The Evolution of Monetary Policy: From Money Targets to Inflation Targets," RBA Annual Conference Volume,in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.

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