Conquering Fear of Floating: Australia's Successful Adaptation to a Flexible Exchange Rate

Craig Beaumont and Li Cui

No 2007/002, IMF Policy Discussion Papers from International Monetary Fund

Abstract: Australia has enjoyed fifteen years of uninterrupted economic expansion since 1992 despite shocks such as the Asian crisis in 1997-98 and the information technology bust in 2000-01. This resilient economic performance owes much to wide-ranging structural reforms and the improved frameworks for monetary and fiscal policies that were implemented after the Australian dollar was floated in 1983. In addition to gaining the expected macroeconomic benefits from exchange rate flexibility, the float appeared to help motivate and facilitate the subsequent reforms. Australia's experience with adapting to a floating currency may therefore be of broader interest.

Keywords: PDP; exchange rate; monetary policy; interest rate; inflation; Floating; Flexible; Monetary; Fiscal; Structural Reform; Macroeconomic Stability; exchange rate development; exchange rate volatility; RBA governor; headline CPI inflation; bank bill; RBA judge; RBA control; terms of trade shock; exchange rate expectation; Exchange rates; Terms of trade; Exchange rate flexibility; Floating exchange rates; Exchange rate adjustments; Global (search for similar items in EconPapers)
Pages: 26
Date: 2007-07-01
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Citations: View citations in EconPapers (3)

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