UNCOVERING THE HIT-LIST FOR SMALL INFLATION TARGETERS: A BAYESIAN STRUCTURAL ANALYSIS

Timothy Kam (), Kirdan Lees and Philip Liu ()

CAMA Working Papers from Australian National University, Centre for Applied Macroeconomic Analysis

Abstract: We estimate the underlying macroeconomic policy objectives of three of the earliest explicit inflation targeters - Australia, Canada and New Zealand - within the context of a small open economy DSGE model. We assume central banks set policy optimally, such that we can reverse engineer policy objectives from observed time series data. We find that none of the central banks show a concern for stablizing the real exchange rate. All three central banks share a cocnern for minimizing the volatility in the change in the nominal interest rate. The Reserve Bank of Australia places the most weight on minimizing the deviation of output from trend. Joint tests of the posterior distributions of these policy preference parameters suggest that the central banks are very similar in their overall objective.

JEL-codes: C51 E52 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: Written 2006-11
View list of references View citations in EconPapers

Downloads: (external link)
http://cama.anu.edu.au/Working%20Papers/Papers/2006/Kam_Lees_Liu_242006.pdf (application/pdf)

Related works:
Working Paper: UNCOVERING THE HIT-LIST FOR SMALL INFLATION TARGETERS: A BAYESIAN STRUCTURAL ANALYSIS (2006)
Working Paper: Uncovering the Hit-list for Small Inflation Targeters: A Bayesian Structural Analysis (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in CAMA Working Papers from Australian National University, Centre for Applied Macroeconomic Analysis
Contact information at EDIRC.
Series data maintained by ().