The Taylor rule in Australia

Paper


Elston, Frank. 2013. "The Taylor rule in Australia." 23rd International Business Research Conference. Melbourne, Australia 18 - 20 Nov 2013 Melbourne, Australia .
Paper/Presentation Title

The Taylor rule in Australia

Presentation TypePaper
Authors
AuthorElston, Frank
Journal or Proceedings TitleProceedings of the 23rd International Business Research Conference
Number of Pages9
Year2013
Place of Publication Melbourne, Australia
ISBN9781922069368
Web Address (URL) of Paperhttp://www.wbiworldconpro.com/uploads/melbourne-conference-2013-november/economics/1384592690_212-Elston.pdf
Conference/Event23rd International Business Research Conference
Event Details
23rd International Business Research Conference
Parent
International Business Research Conference (IBR)
Delivery
In person
Event Date
18 to end of 20 Nov 2013
Event Location
Melbourne, Australia
Abstract

The Taylor rule is a rules based monetary policy whereby the policy maker reacts to inflation and output gaps in setting the policy instrument, usually a short term interest rate. It can be prescriptive or descriptive. This study examines whether the Taylor rule describes the behaviour of the Reserve Bank of Australia since 1996, a period encompassing the last two Governors of the RBA.
Using the traditional gap coefficients of .5 we find the implied Taylor cash rate , which then can be compared with the actual cash rate. The Taylor rule describes well the policymaking during the era of Governor Glenn Stevens, but does not describe as well the policymaking during the era of his predecessor. The study also determines the least squares estimates of the coefficients and finds that both the inflation and output coefficients exceed .5. A supplementary finding is that lagging the output and inflation gaps did not make any material difference.

Keywordsmonetary policy; cash rate
ANZSRC Field of Research 2020380112. Macroeconomics (incl. monetary and fiscal theory)
Public Notes

Copyright © 2013 by the publisher. All rights reserved. No part of this publication can be reproduced in any form or by any means without the permission of the concerned author or the WBI.

Byline AffiliationsSchool of Commerce
Institution of OriginUniversity of Southern Queensland
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