Inflation Targeting Through Short Term Interest Rate: Australian Experience

JURNAL EKONOMI DAN STUDI PEMBANGUNAN , 2011

After the failure of the Bretton Woods System, new monetary tools are required for influencing monetary policy. Inflation targeting is the one alternative monetary policy stratgey that was implemented for firts time in New Zealand in 1990. Recently, this monetary stratgey has been adopted by 20 industrilaised and non industrialised countries. This essay give a short of appraisal review on inlflation theory, especially the positive and negative of the infaltion targeting regime. Then, its examines the Australian central bank policies in implementing inflantion targeting. This paper closed by explain the new formula to mix inflation targeting with another monetary regimes techniques.

2009

There is now a remarkably strong consensus among academics and professional economists that central banks should adopt explicit inflation targets and that all key monetary policy decisions, especially those concerning interest rates, should be made with a view to ensuring that these targets are achieved. This book provides a comprehensive review of the experience of inflation targeting since its introduction in New Zealand in 1989 and looks in detail at what we can learn from the past twenty years and what challenges we may face in the future. Written by a distinguished team of academics and professional economists from central banks around the world, the book covers a wide range of issues including many that have arisen as a result of the recent financial crisis. It should be read by anyone concerned with better understanding inflation targeting and its past, present and future role within monetary policy.

2009

Starting with the 90, price stability became an increasingly important goal of the monetary authorities in many countries for at least two reasons. Firstly, central bank is the institution responsable for ensuring price stability in the long-run. Secondly, monetary policy can stimulate economic growth and employment in the long-run principally by maintaining inflation under control. Thus, the monetary policy strategy

European Economic Review, 1997

In ‡ation targeting is shown to imply in ‡ation forecast targeting: the central bank's in ‡ation forecast becomes an explicit intermediate target. In ‡ation forecast targeting simpli…es both implementation and monitoring of monetary policy. The weight on output stabilization determines how quickly the in ‡ation forecast is adjusted towards the in ‡ation target. Money growth or exchange rate targeting is generally inferior than in ‡ation targeting and leads to higher in ‡ation variability. Commitment to 'target rules' may be better than commitment to 'instrument rules'.

Inflation targeting has been adopted as a monetary policy framework by many economies – particularly emerging and advanced countries. Although several researchers have argued that it is a recommended policy measure to curb inflation in a prospectively high inflation-saddled economy, other scholars think otherwise. A critical review of the arguments for and against inflation targeting as a tool of ensuring price stability in presented in this paper. Accordingly, the paper points out that the targeting framework has been established and proven effective in several countries, but it is arguably not satisfactory enough. The paper recommends that a realistically attainable percentage – usually a flexible target range and a time-lag for achieving the target should be set. This is because over-ambitiousness on the part of monetary authorities can invariably lower the economic prestige, credibility and monetary policy independence of a country particularly if the set-target becomes unattainable. Notwithstanding, developing countries need to create an enabling environment in terms of strong financial markets and commitment to price stability alongside establishing a well-developed forecasting framework in order to reach the desired effects of inflation targeting .

In this paper I look at the practice of inflation targeting and the costs and benefits associated with it. I will also look at a theoretical model and empirical evidence on the impact of inflation targeting on inflation and output.

Economic Issues, 1998

2005

An increasing number of countries have adopted inflation targeting since New Zealand first adopted this framework in early 1990. Currently there are 21 countries using inflation targeting in every continent of the world. This paper discusses the characteristics of these countries and how the adoption of inflation targeting has affected their economic performance along several dimensions. The main conclusion is that inflation targeting has largely been a success. The new framework has made central banks, which previously lacked credibility, able to change the way they do monetary policy towards what is commonly considered best practice. In many respects they have even been leading in creating a new benchmark for how to formulate monetary policy.

This volume of papers from the Reserve Bank’s annual conference in 2004, bringing together academics and central bankers to discuss inflation targeting, provides a very useful guide to the issues, being rigorous while remaining grounded in the reality of policy-making