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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.

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  • 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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    Cited by:

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    2. Goran Petrevski, 2023. "Macroeconomic Effects of Inflation Targeting: A Survey of the Empirical Literature," Papers 2305.17474, arXiv.org.
    3. Enock Nyorekwa Twinoburyo & Nicholas M Odhiambo, 2018. "Can Monetary Policy drive economic growth? Empirical evidence from Tanzania," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 12(2), June.
    4. Akhand Akhtar Hossain & Popkarn Arwatchanakarn, 2016. "Inflation and inflation volatility in Thailand," Applied Economics, Taylor & Francis Journals, vol. 48(30), pages 2792-2806, June.
    5. Martin Stojanovikj & Goran Petrevski, 2024. "Inflation targeting and disinflation costs in Emerging Market economies," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 283-312, February.
    6. Mesbah Fathy Sharaf, 2015. "Inflation and Inflation Uncertainty Revisited: Evidence from Egypt," Economies, MDPI, vol. 3(3), pages 1-19, July.
    7. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611.
    8. Hayat, Zafar & Balli, Faruk & Rehman, Muhammad, 2018. "Does inflation bias stabilize real growth? Evidence from Pakistan," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1083-1103.
    9. , Le Thanh Tung, 2021. "Fiscal Policy, Monetary Policy and Price Volatility: Evidence from an Emerging Economy," OSF Preprints 7u56v, Center for Open Science.
    10. Juan Camilo Galvis Ciro & Juan Camilo Anzoátegui Zapata, 2019. "Disagreement in inflation expectations: empirical evidence for Colombia," Applied Economics, Taylor & Francis Journals, vol. 51(40), pages 4411-4424, August.
    11. 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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