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Optimal Monetary Policy Rules and Inflation Targets: Are Australia, Canada, and New Zealand Different from the U.S.? Open Economies Review October 2004, Volume 15, Issue 4, pp 347–362 | Cite as Sean Collins (1) Pierre L. Siklos (2) 1. Investment Company Institute, Washington, USA 2. Department of Economics, Wilfrid Laurier University, Waterloo, Canada Article 223 Downloads 18 Citations
Abstract Outwardly, the central banks of Australia, Canada, New Zealand, and the U.S. follow somewhat different approaches to controlling inflation. The U.S. does not explicitly target inflation while the other countries do. Canada and New Zealand have target bands for inflation while Australia has a point target. Results in this paper nevertheless find broad similarities in the monetary policies of these countries. Each can be described as having pursued optimal inflation targeting (explicit or implicit), with heavy interest rate smoothing, but perhaps placing little weight on output variability. We argue that interest rate smoothing is used to introduce gradualism into the response of monetary policy to inflation. We show that given heavy interest rate smoothing, a concern for output variability is redundant. inflation targeting optimal Taylor rules
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About this article Cite this article as: Collins, S. & Siklos, P.L. Open Economies Review (2004) 15: 347. https://doi.org/10.1023/B:OPEN.0000048523.79011.b2 DOI (Digital Object Identifier) https://doi.org/10.1023/B:OPEN.0000048523.79011.b2 Publisher Name Kluwer Academic Publishers Print ISSN 0923-7992 Online ISSN 1573-708X About this journal Reprints and Permissions
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