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...

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...

This paper examines the effects of monetary policy in Australia using a small structural vector autoregression model. The model we use is a modification of the small open economy model developed for the G6 economies (the G7 less the United States) by Kim and Roubini (1999). The success of the...

The length of the transmission lags from monetary policy to output has been the subject of much research over the years, but there are serious problems in isolating the lags with any precision. This paper uses a simple model of Australian output to estimate the length of the lags, and then...

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...

This paper explores the extent to which Knightian uncertainty can explain features of interest rate paths observed in practice that are not generally replicated by models of optimal monetary policy. Interest rates tend to move in a sequence of steps in a given direction, or remain constant for...

This paper reviews issues in the econometric modelling of monetary policy in the light of recent experience and research. Two main sets of issues are covered: first, the operation of policy including the specification of the instrument and objectives; and second, the transmission of monetary...

This paper studies two types of interest rate rules that involve long-term nominal interest rates in the context of a New Keynesian model. The first type considers the possibility of adding longer-term rates to the list of variables the central bank reacts to in setting its short-term rate. The...

In this paper we develop a theoretical framework that helps to analyse the role of monetary policy in responding to asset-price bubbles. A large and rapid fall in the nominal price of assets that form the basis of collateral for loans from financial intermediaries can have adverse effects on...