Inflation Targeting and the Inflation Process: Some Lessons from an Open Economy
In an open economy inflation-targeting framework, whether policy-makers should target aggregate or non-traded inflation depends on the structural relationships in the economy. This paper shows that in a small empirical model of the Australian economy, it makes little difference which measure is targeted. This conclusion is reinforced by the significant changes to the inflation process that the paper suggests have occurred over the past two decades: the effect of exchange rate changes on inflation appears to have become more muted and the inflation process appears to have become better anchored.
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- Jacqueline Dwyer & Kenneth Leong, 2001. "Changes in the Determinants of Inflation in Australia," RBA Research Discussion Papers rdp2001-02, Reserve Bank of Australia.
- Chris Ryan & Christopher Thompson, 2000. "Inflation Targeting and Exchange Rate Fluctuations in Australia," RBA Research Discussion Papers rdp2000-06, Reserve Bank of Australia.
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- Jacqueline Dwyer & Kenneth Leong, 2001. "Changes in the determinants of inflation in Australia," BIS Papers chapters, in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 1-28 Bank for International Settlements.
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