The Taylor rule in Australia

Elston, Frank (2013) The Taylor rule in Australia. In: 23rd International Business Research Conference, 18-20 Nov 2013, Melbourne, Australia.


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.

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Item Type: Conference or Workshop Item (Commonwealth Reporting Category E) (Paper)
Refereed: Yes
Item Status: Live Archive
Additional Information: 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.
Faculty/School / Institute/Centre: Current - Faculty of Business, Education, Law and Arts - School of Commerce
Date Deposited: 04 Apr 2014 03:56
Last Modified: 16 Sep 2014 04:43
Uncontrolled Keywords: monetary policy; cash rate
Fields of Research : 14 Economics > 1402 Applied Economics > 140212 Macroeconomics (incl. Monetary and Fiscal Theory)
Socio-Economic Objective: B Economic Development > 91 Economic Framework > 9101 Macroeconomics > 910108 Monetary Policy

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