In an open economy inflation-targeting framework, whether policy-makers should target aggregate or non-traded inflation depends on the structural relationships in the economy. This paper shows that in a small empirical model of the Australian economy, it makes little difference which measure is...

In a model where the risk premium on long-term debt is, in part, endogenously determined, we study two kinds of unconventional monetary policy: long-term nominal interest rates as operating instruments of monetary policy and announcements about the future path of the short-term rate. We find...

Inflation targeting has been criticised for being ‘inflation only’ targeting and hence, for ignoring output and employment. This paper argues that this criticism is misplaced. The inflation-targeting framework has sufficient flexibility to allow for the short-run trade-off between output and...

Several recent papers have explored the possibility that inflation-targeting central banks in small open economies pay too much attention to exchange rate fluctuations; changing short-term interest rates in response to fluctuations that have transient effects on inflation could be...

We review recent changes in monetary policy that have led to development and testing of an overnight reverse repurchase agreement (ON RRP) facility, an innovative tool for implementing monetary policy during the normalization process. Making ON RRPs available to a broad set of investors,...

The 1950s are often pointed to as a decade in which the Federal Reserve operated a particularly successful monetary policy. The present paper examines the evolution of Federal Reserve monetary policy from the mid-1930s through the 1950s in an effort to understand better the apparent success of...

Quarterly national accounts data are amongst the most important and eagerly awaited economic information available, with estimates of recent growth regarded as a key summary indicator of the current health of the Australian economy. Official estimates of quarterly output are, however, subject to...

Whether people form their expectations of the future in a model-consistent or extrapolative manner, has implications for the way the economy and monetary policy are modelled. The first half of this paper provides three pieces of information about inflation expectations – that survey measures...

The decline in output volatility in a number of countries over the past few decades has been well-documented, though less agreement has been reached about the causes of this decline. In this paper, we use a panel of data from 20 OECD countries to see if there is a role for various indicators of...

In practice, monetary policy changes tend to produce a smooth path for interest rates while the path of policy interest rates generated by models is often considerably more variable. This paper investigates whether the inclusion of uncertainty can help reconcile the theory to the practice. It...