Research Discussion Paper – RDP 2000-06 Inflation Targeting and Exchange Rate Fluctuations in Australia

Contents

• Introduction
• Open Economy Inflation Targeting
• The Model
• Empirical Results of Stochastic Simulations
• Conclusion
• Appendix A: Estimates of the Model
• Appendix B: Equations for the Exogenous Variables in the Model
• Appendix C: Design of the Stochastic Simulations
• Appendix D: Data Definitions and Sources
• References

An earlier version of this paper was presented at the Sveriges Riksbank workshop on Inflation Targeting and Exchange Rate Fluctuations, held in Stockholm, 24–25 August 1999. We are grateful to participants at that workshop and colleagues at the Reserve Bank for their comments on the paper. We are particularly indebted to Luci Ellis for numerous comments and technical assistance with the use of Mathematica. The views expressed in this paper are our own and should not be attributed to the Reserve Bank of Australia.