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Indicators of Inflationary Pressure

Author

Listed:
  • Michael Coelli

    (Reserve Bank of Australia)

  • Jerome Fahrer

    (Reserve Bank of Australia)

Abstract

This paper examines the statistical properties of a number of leading indicators of inflation, using Australian data over the period 1966 through 1991. We pay particular attention to the much-discussed P*, as well as measures of capacity utilisation, the cyclical rate of unemployment and the growth rate of a monetary aggregate (currency). Our results show that, up until mid 1990, the gap between trend and observed velocity of currency, as well as the growth rate of currency performed well as inflation indicators. Since then, the rapid decline in inflation has been best predicted by variables such as the level of capacity utilisation, the rate of cyclical unemployment, and the gap between output and its trend value.

Suggested Citation

  • Michael Coelli & Jerome Fahrer, 1992. "Indicators of Inflationary Pressure," RBA Research Discussion Papers rdp9207, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9207
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    File URL: https://www.rba.gov.au/publications/rdp/1992/pdf/rdp9207.pdf
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    References listed on IDEAS

    as
    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    2. Peter Hoeller & Pierre Poret, 1991. "P-Star as an Indicator of Inflationary Pressure," OECD Economics Department Working Papers 101, OECD Publishing.
    3. Flood, Robert, 1989. "Commodity prices and aggregate inflation: Would a commodity price rule be worthwhile? a comment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 31(1), pages 241-246, January.
    4. Hallman, Jeffrey J & Porter, Richard D & Small, David H, 1991. "Is the Price Level Tied to the M2 Monetary Aggregate in the Long Run?," American Economic Review, American Economic Association, vol. 81(4), pages 841-858, September.
    5. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    6. James M. Boughton & William H. Branson & Alphecca Muttardy, 1989. "Commodity Prices and Inflation: Evidence From Seven Large Industrial Countries," NBER Working Papers 3158, National Bureau of Economic Research, Inc.
    7. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-1171, September.
    8. James M. Boughton & William H. Branson, 1988. "Commodity Prices as a Leading Indicator of Inflation," NBER Working Papers 2750, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ellis W. Tallman & Naveen Chandra, 1996. "The Information Content of Financial Aggregates in Australia," RBA Research Discussion Papers rdp9606, Reserve Bank of Australia.
    2. de Brouwer, Gordon & Ericsson, Neil R, 1998. "Modeling Inflation in Australia," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 433-449, October.

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