Research Discussion Paper – RDP 2002-01 Inflation Targeting and the Inflation Process: Some Lessons from an Open Economy

Contents

• Introduction
• Which Inflation Rate to Target in an Open Economy?
• Evidence from a Small Empirical Macro Model
• Evidence of Changes in the Inflation Process
• Conclusion
• Appendix A: A Small Macroeconomic Model of Australia
• Appendix B: Data
• References

This paper is a revised version of a paper presented at a Central Bank of Chile Conference on 10 years of Inflation Targeting: Design, Performance, Challenges held in Santiago, Chile, 30 November–1 December 2000. We would like to thank Adam Cagliarini and Ben McLean for superb research assistance, and participants at the conference for their comments. The views expressed in this paper are those of the authors and not necessarily those of the Reserve Bank of Australia.