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Changes in the Characteristics of the Australian Business Cycle: Some Lessons for Monetary Policy from the 1980s and Early 1990s

Author

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  • Adrian Blundell-Wignall

    (Reserve Bank of Australia)

  • Michele Bullock

    (Reserve Bank of Australia)

Abstract

This paper examines the causes of asset price inflation and deflation in the Australian economy, their links with borrowing and recent problems that have arisen for banks’ balance sheets. Implications for the business cycle and monetary policy are drawn out in some detail. The difficulties encountered are attributed partly to the once-for-all transition from regulated to deregulated financial markets, and it is argued that it would be wrong to extrapolate recent developments into the future . It is suggested that arguments to make asset price inflation an explicit objective of monetary policy are not helpful. The paper goes to point out some encouraging new trends in Australia’s linkages with the rest of the world. Export performance has been greatly enhanced by longer-term reforms and exchange rate depreciation during the 1980s.

Suggested Citation

  • Adrian Blundell-Wignall & Michele Bullock, 1992. "Changes in the Characteristics of the Australian Business Cycle: Some Lessons for Monetary Policy from the 1980s and Early 1990s," RBA Research Discussion Papers rdp9212, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9212
    as

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    File URL: https://www.rba.gov.au/publications/rdp/1992/pdf/rdp9212.pdf
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    References listed on IDEAS

    as
    1. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
    2. Adrian Blundell-Wignall & Marianne Gizycki, 1992. "Credit Supply and Demand and the Australian Economy," RBA Research Discussion Papers rdp9208, Reserve Bank of Australia.
    3. Adrian Blundell-Wignall & Robert G. Gregory, 1990. "Exchange Rate Policy in Advanced Commodity-Exporting Countries: The Case of Australia and New Zealand," OECD Economics Department Working Papers 83, OECD Publishing.
    4. repec:bla:ecorec:v:68:y:1992:i:201:p:151-64 is not listed on IDEAS
    5. Adrian Blundell-Wignall & Marilyn Thomas, 1987. "Deviations From Purchasing Power Parity: The Australian Case," RBA Research Discussion Papers rdp8711, Reserve Bank of Australia.
    6. David M. Cutler & James M. Poterba & Lawrence H. Summers, 1991. "Speculative Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(3), pages 529-546.
    7. Tim Callen, 1991. "Estimates of Private Sector Wealth," RBA Research Discussion Papers rdp9109, Reserve Bank of Australia.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. David Gruen & Geoffrey Shuetrim, 1994. "Internationalisation and the Macroeconomy," RBA Annual Conference Volume (Discontinued), in: Philip Lowe & Jacqueline Dwyer (ed.),International Intergration of the Australian Economy, Reserve Bank of Australia.
    2. Ernst A. Boehm & Woei T. Liew, 1994. "A Review of Australia's Recent Business Cycle Experiences and a Forecast Length of the Current Expansion," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 27(3), pages 4-19, July.
    3. Michael Andersen & Robert Subbaraman, 1996. "Share Prices and Investment," RBA Research Discussion Papers rdp9610, Reserve Bank of Australia.

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