A Factor Model Analysis of the Australian Economy and the Effects of Inflation Targeting
Luke Hartigan () and
James Morley ()
The Economic Record, 2020, vol. 96, issue 314, 271-293
Based on a dynamic factor model for a data set with more than 100 variables, we find that macroeconomic fluctuations in Australia can be largely captured by just two common factors. However, the factor structure changed soon after the introduction of inflation targeting in the 1990s, resulting in a large reduction in cross‐sectional variation related to these common factors. Estimates from a block‐exogenous factor‐augmented vector autoregressive model suggest that the transmission and responsiveness of monetary policy also changed, with policy both more effective and responsive to the potential inflationary impacts of shocks following the introduction of inflation targeting.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Working Paper: A Factor Model Analysis of the Australian Economy and the Effects of Inflation Targeting (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:ecorec:v:96:y:2020:i:314:p:271-293
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0013-0249
Access Statistics for this article
The Economic Record is currently edited by Paul Miller, Glenn Otto and Martin Richardson
More articles in The Economic Record from The Economic Society of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().