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The Implementation of Monetary Policy in Australia

Author

Listed:
  • Ric Battellino

    (Reserve Bank of Australia)

  • John Broadbent

    (Reserve Bank of Australia)

  • Philip Lowe

    (Reserve Bank of Australia)

Abstract

In January 1990, the Reserve Bank of Australia (RBA) began announcing and explaining changes in the target cash rate. This has increased public understanding of monetary policy and, by increasing the attention given to changes in interest rates, has affected the way in which changes in policy are transmitted to the economy. In addition, the discipline of having to announce and explain changes in the target cash rate to the public has led to a clearer focus on the objectives of monetary policy within the RBA and improved the accountability of the Bank. It has also led to a substantial decline in the volatility of short-term interest rates and more rapid pass-through of changes in the target cash rate into deposit and lending rates. In Australia, as in many other countries, interest rates have tended to be adjusted in a series of steps in the same direction. In part, this can be explained in terms of the uncertainty that policy-makers face, and the costs involved in frequently reversing the direction of interest-rate changes.

Suggested Citation

  • Ric Battellino & John Broadbent & Philip Lowe, 1997. "The Implementation of Monetary Policy in Australia," RBA Research Discussion Papers rdp9703, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9703
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    References listed on IDEAS

    as
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    10. Barro, Robert J., 1989. "Interest-rate targeting," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 3-30, January.
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    Citations

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    Cited by:

    1. Ellingsen, Tore & Söderström, Ulf, 2004. "Why Are Long Rates Sensitive to Monetary Policy?," Working Paper Series 160, Sveriges Riksbank (Central Bank of Sweden).
    2. Tore Ellingsen & Ulf Soderstrom, 2001. "Monetary Policy and Market Interest Rates," American Economic Review, American Economic Association, vol. 91(5), pages 1594-1607, December.
    3. Katherine Avram, 1998. "Implications Of New Payments Technology For Monetary Policy," Economic Papers, The Economic Society of Australia, vol. 17(4), pages 54-68, December.
    4. Kam Fong Chan, 2005. "Modelling conditional heteroscedasticity and jumps in Australian short‐term interest rates," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(4), pages 537-551, December.
    5. Philip Lowe & Luci Ellis, 1997. "The Smoothing of Official Interest Rates," RBA Annual Conference Volume (Discontinued), in: Philip Lowe (ed.),Monetary Policy and Inflation Targeting, Reserve Bank of Australia.
    6. Mota, Paulo R. & Fernandes, Abel L.C., 2022. "Is the ECB already following albeit implicitly an average inflation targeting strategy?," Research in Economics, Elsevier, vol. 76(3), pages 149-162.
    7. Shawn Chen‐Yu Leu & Jeffrey Sheen, 2006. "Asymmetric Monetary Policy in Australia," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages 85-96, September.
    8. Rhys R. Mendes & Stephen Murchison & Carolyn A. Wilkins, 2017. "Monetary Policy Under Uncertainty: Practice Versus Theory," Discussion Papers 17-13, Bank of Canada.
    9. Robert W. Faff & Allan Hodgson & Michael L. Kremmer, 2005. "An Investigation of the Impact of Interest Rates and Interest Rate Volatility on Australian Financial Sector Stock Return Distributions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5‐6), pages 1001-1031, June.
    10. Frank Campbell & Eleanor Lewis, 1998. "What Moves Yields in Australia?," RBA Research Discussion Papers rdp9808, Reserve Bank of Australia.
    11. Kathleen Walsh & David Tan, 2008. "Monetary Policy Surprises and the Bank Bill Term Premium," Australian Journal of Management, Australian School of Business, vol. 33(2), pages 231-260, December.
    12. Robert W. Faff & Allan Hodgson & Michael L. Kremmer, 2005. "An Investigation of the Impact of Interest Rates and Interest Rate Volatility on Australian Financial Sector Stock Return Distributions," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 32(5‐6), pages 1001-1031, June.
    13. Rushdi, Mustabshira & Kim, Jae H. & Silvapulle, Param, 2012. "ARDL bounds tests and robust inference for the long run relationship between real stock returns and inflation in Australia," Economic Modelling, Elsevier, vol. 29(3), pages 535-543.

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    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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