Empirical Studies of Structural Changes and Inflation

Bank for International Settlements
2001 Social Science Research Network  
Stevens (1999) provides an assessment of Australia's inflation experience over the 1990s. 3 Bootle (1996) is a prominent example of this claim. 4 In the long run, these developments are likely to lower the price level rather than the ongoing rate of inflation, which is determined by monetary policy. 11 These issues are explored comprehensively elsewhere (see Lowe (1997)). For a comment on how the target has conditioned Australian decisions on monetary policy specifically, see Stevens (1999). 12
more » ... Internal Bank forecasts of inflation one and two quarters ahead have been well realised. In contrast, when forecasting over longer periods of six quarters, outcomes have, on average, been lower than expected. Although these forecasts are made with an assumption of no change in the exchange rate, when we revisit them, with the actual path of the exchange rate known, outcomes remain lower than predicted (by, on average, around ½ percentage point).
doi:10.2139/ssrn.1171300 fatcat:uk526bv3qfga3nshaxlyeuys6e