Indicators of Inflationary Pressure

Michael Coelli and Jerome Fahrer
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Jerome Fahrer: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: This paper examines the statistical properties of a number of leading indicators of inflation, using Australian data over the period 1966 through 1991. We pay particular attention to the much-discussed P*, as well as measures of capacity utilisation, the cyclical rate of unemployment and the growth rate of a monetary aggregate (currency). Our results show that, up until mid 1990, the gap between trend and observed velocity of currency, as well as the growth rate of currency performed well as inflation indicators. Since then, the rapid decline in inflation has been best predicted by variables such as the level of capacity utilisation, the rate of cyclical unemployment, and the gap between output and its trend value.

Date: 1992-07
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp9207

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