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Monetary Policy Goals for Inflation in Australia

Author

Listed:
  • Guy Debelle

    (Reserve Bank of Australia)

  • Glenn Stevens

    (Reserve Bank of Australia)

Abstract

This paper outlines the inflation objective for monetary policy in Australia, which we describe as seeking to achieve a broad central tendency for inflation of between 2 and 3 per cent over the long run – a “thick point” – rather than a narrow target band. It also provides a more detailed rationale for this objective. In doing so, the paper discusses the issues relevant in determining the appropriate mean inflation rate at which policy should aim, the degree of variation of inflation around that central point, and how policy should respond to shocks. A simple model of the economy is presented which attempts to address these issues in a consistent framework.

Suggested Citation

  • Guy Debelle & Glenn Stevens, 1995. "Monetary Policy Goals for Inflation in Australia," RBA Research Discussion Papers rdp9503, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp9503
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    File URL: http://www.rba.gov.au/publications/rdp/1995/pdf/rdp9503.pdf
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    References listed on IDEAS

    as
    1. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    2. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-741, September.
    3. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 195-225.
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