Monetary policy reaction functions in Australia

Gordon de Brouwer; James Gilbert

doi:10.1111/j.1475-4932.2005.00238.x

Monetary policy reaction functions in Australia

Gordon de Brouwer^*, James Gilbert

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

22 Citations (Scopus)

Abstract

Interest-rate functions are estimated to assess the stability of Australian monetary policy in the post-float period. The results indicate that the Reserve Bank of Australia (RBA) is forward-looking, focusing on outcomes 1 year ahead. The weight on inflation in the RBA reaction function has increased, and that on output has decreased, since inflation targeting. This is robust to various definitions of the output gap. The RBA also appears to take modest account of sustained movements in the effective exchange rate. Point estimates of the implied neutral rate of interest are from 5 to 51/2 per cent.

Original language	English
Pages (from-to)	124-134
Number of pages	11
Journal	Economic Record
Volume	81
Issue number	253
DOIs	https://doi.org/10.1111/j.1475-4932.2005.00238.x
Publication status	Published - Jun 2005

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Monetary policy reaction functions in Australia

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