Research Discussion Paper – RDP 9803 Forward-Looking Behaviour and Credibility: Some Evidence and Implications for Policy

Contents

• Introduction
• Evidence on the Formation of Inflation Expectations
• Policy Implications
• Conclusions
• Appendix A: A Test for the Rationality of Inflation Expectations
• Appendix B: A Framework for Analysis
• Appendix C: The Effect of Different Interest Rate Assumptions
• References

This paper was prepared for the Model Builders' and Econometricians' Meeting at the Bank for International Settlements on 19 and 20 February 1998. All views expressed are those of the authors, and do not necessarily reflect the views of the Reserve Bank of Australia. We are grateful to David Gruen, Philip Lowe, Geoff Shuetrim, Glenn Stevens and participants at a seminar at the Reserve Bank for helpful comments.