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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
    as

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    File URL: https://www.rba.gov.au/publications/rdp/1995/pdf/rdp9503.pdf
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    References listed on IDEAS

    as
    1. Richard De Abreu Lourenco & David Gruen, 1995. "Price Stickiness and Inflation," RBA Research Discussion Papers rdp9502, Reserve Bank of Australia.
    2. 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.
    3. Summers, Lawrence, 1991. "How Should Long-Term Monetary Policy Be Determined? Panel Discussion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 625-631, August.
    4. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    5. 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.
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