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Monetary policy, inflation, and inflation volatility in Australia

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  • Akhand Hossain

Abstract

This article presents an overview of monetary policy in Australia and highlights the persistence and volatility of inflation under successive monetary policy regimes, 1950-2010. A series of unit root tests specified both linearly and nonlinearly investigate whether inflation persistence has the characteristic of a unit root. The overall results for the full sample period, 1950-2010, and two subsample periods, 1970-2010 and 1993-2010, suggest that Australia's high inflation persistence does not incorporate a unit root, with the post-1993 analysis most emphatically yielding the result. High inflation persistence and volatility in Australia suggest that inflationary shock takes a long time to dissipate but does not permanently alter the low average level of inflation. The empirical results suggest that inflation and inflation volatility have a feedback relation while inflation volatility affects the rates of economic growth and unemployment.

Suggested Citation

  • Akhand Hossain, 2014. "Monetary policy, inflation, and inflation volatility in Australia," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 36(4), pages 745-780.
    • Handle: RePEc:mes:postke:v:36:y:2014:i:4:p:745-780
    DOI: 10.2753/PKE0160-3477360408
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    7. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611, June.
    8. Haryo Kuncoro, 2024. "Inflation and Its Uncertainty: Evidence from Indonesia and the Philippines," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 16(2), pages 231-247, May.
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    12. Bruno Ferreira Frascaroli & Wellington Charles Lacerda Nobrega, 2019. "Inflation Targeting and Inflation Risk in Latin America," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(11), pages 2389-2408, September.

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