The steady inflation rate of economic growth
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Dungey, Mardi
Pitchford, John
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Canberra, ACT: Centre for Economic Policy Research (CEPR), The Australian National University
Abstract
This paper considers the existence of a path of GDP corresponding to steady inflation in the prices of domestic goods. We estimate the steady inflation rate of growth, denoted the SIRG, at a little over 4 per cent per annum in the post-float period. Changes in inflation are modelled as a nonlinear combination of growth and changes in import price inflation. Because import price inflation is more volatile than overall inflation, policy that targets overall inflation may require growth to fluctuate considerably, whereas growth can be steady if the target is steady inflation of domestic goods’ prices.
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Keywords
inflation, growth, import prices, monetary policy
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Working/Technical Paper
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Open Access
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