Assessing Australian monetary policy in the twenty-first century

Isaac Gross, Andrew Leigh

Using the Reserve Bank of Australia's MARTIN model we compare actual monetary policy decisions to a counterfactual in which the cash rate is set according to an optimal simple rule. We find that monetary policy played a crucial role in avoiding a potential recession in 2001 and mitigating the downturn in 2008-2009. By contrast we find that the cash rate was too high during 2016-2019, keeping inflation below the Reserve Bank's target band. Optimal monetary policy in 2016-2019 would have involved a substantially lower cash rate and would have produced significantly better employment outcomes.

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Year of publication:	September 2022
Authors:	Gross, Isaac ; Leigh, Andrew
Publisher:	Bonn, Germany : IZA - Institute of Labor Economics
Subject:	optimal monetary policy \| unemployment \| output gap \| inflation \| Geldpolitik \| Monetary policy \| Australien \| Australia \| Inflation \| Arbeitslosigkeit \| Unemployment \| Produktionspotenzial \| Potential output \| Bruttoinlandsprodukt \| Gross domestic product \| Inflationssteuerung \| Inflation targeting \| Konjunktur \| Business cycle

Extent:	1 Online-Ressource (circa 46 Seiten) Illustrationen
Series:	Discussion paper series / IZA. - Bonn : IZA, ZDB-ID 2120053-1. - Vol. no. 15561
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
Other identifiers:	hdl:10419/265782 [Handle]
Classification:	E47 - Forecasting and Simulation ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10013373260