Inflation expectations have wide-reaching effects on the macroeconomy and are an important part of the transmission of monetary policy. This paper analyses the Melbourne Institute survey of householders’ inflation expectations. Householders’ average inflation expectations vary with personal...

The hypothesis that deviations from PPP follow a random process is tested against two alternatives that the real exchange rate reverts to a constant equilibrium level (long-run PPP); and that it reverts to an equilibrium level which is itself a function of shifts in commodity prices (long-run...

The breakdown of conventional short-run demand functions for money in a number of countries, including Australia, is well known. In recent years, there has been a rush of publications, both overseas and in Australia, concerning the long-run relationships between the money stock, activity and...

Australia’s household sector appears to hold a greater proportion of its wealth in dwellings than do households in other countries. Average dwelling prices in Australia also appear to be high relative to household income, but dwellings in Australia are not noticeably higher in quality than...

In the second half of 1997 many Asian emerging economies suffered large declines in both their currency and equity markets. This Asian financial turmoil arose primarily from three interrelated sets of factors, namely: shortcomings in the financial sector at a time when global liquidity...

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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...

Australia is in the early stages of introducing a system of self-provision for retirement through mandatory contributions to private superannuation funds. For most employees, the scheme will eventually replace, either fully or partially, the government age pension, currently relied upon by a...

Expectations play an important role in the recent literature on the theory of macroeconomic policy. Rather than approaching the problem of macroeconomic policy formulation from the point of view of a policymaker mechanically controlling an economy, the recent literature has focussed on the...

This paper examines the choice of a monetary policy rule in a simple macroeconomic model. In a closed economy, the optimal policy is a ‘Taylor rule’ in which the interest rate depends on output and inflation. In an open economy, the optimal rule changes in two ways. First, the policy...