This paper examines the factors that drive corporate investment in Australia using a panel of listed companies covering … the period from 1990 to 2004. Real sales growth is found to be a significant determinant of corporate investment. The user … paper also explores the effects of cash flow on investment, allowing for the possibility that the availability of internal …

, by reducing the extent of intermediated finance, can reduce output below potential and keep inflation below the central … this means that expected inflation is below target in the short run. Such a policy is optimal because it can help to avoid …

In an open economy inflation-targeting framework, whether policy-makers should target aggregate or non-traded inflation … inflation process that the paper suggests have occurred over the past two decades: the effect of exchange rate changes on … inflation appears to have become more muted and the inflation process appears to have become better anchored. …

Several recent papers have explored the possibility that inflation-targeting central banks in small open economies pay … transient effects on inflation could be counterproductive. Accordingly, we investigate whether the Reserve Bank of Australia …, while ultimately concerned with aggregate inflation and output, should set short-term interest rates on the basis of …

optimal policy is a ‘Taylor rule’ in which the interest rate depends on output and inflation. In an open economy, the optimal … interest rate and the exchange rate. Second, on the right side of the rule, inflation is replaced by ‘long-run inflation’, a … variable that filters out the transitory effects of exchange-rate movements. The model also implies that pure inflation …

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 inflation. The extent to which it does so in part reflects some design …

information about inflation expectations – that survey measures of expectations are inconsistent with rational expectations, but … less so for financial markets than households; that actual and expected inflation interact with each other; and that the … foreign exchange market anticipates tighter monetary policy when inflation is higher than expected. The second half of the …

Ball and Sheridan (forthcoming) show that OECD countries with a history of high inflation before the 1990s have … subsequently experienced a larger degree of disinflation than countries with a history of low inflation. They label this process … ‘regression to the mean’, and argue that it explains why those OECD countries which adopted inflation targeting experienced larger …