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      Monetary policy and interest rates under inflation targeting in Australia and New Zealand

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      Author(s)
      Berument, Hakan
      Froyen, R. T.
      Date
      2015
      Source Title
      New Zealand Economic Papers
      Print ISSN
      0077-9954
      Electronic ISSN
      1943-4863
      Publisher
      Routledge
      Volume
      49
      Issue
      2
      Pages
      171 - 188
      Language
      English
      Type
      Article
      Item Usage Stats
      619
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      183
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      Abstract
      One advantage cited for formal inflation targeting is that by anchoring inflationary expectations this policy framework would aid in the pricing of long-term securities. Long-term interest rates would become less sensitive to temporary shocks to the economy including policy-induced changes in short-term interest rates. This paper examines the experience in this regard of New Zealand and Australia, two countries that have been inflation targeters for many years. Our results are consistent with inflationary expectations having become more firmly anchored after the move to inflation targeting in each country. There is no evidence that the credibility of the inflation-targeting regime in either country weakened during the recent world financial crisis. © 2014 New Zealand Association of Economists Incorporated.
      Keywords
      Inflation targeting
      Long-term interest rate
      Monetary policy
      Permalink
      http://hdl.handle.net/11693/24214
      Published Version (Please cite this version)
      http://dx.doi.org/10.1080/00779954.2014.929608
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