ifdp · October 31, 1995

Modelling Inflation in Australia

Abstract

This paper develops an empirically constant, data-coherent, error correction model for inflation in Australia. The level of consumer prices is a mark-up over domestic and import costs, with adjustments for dynamics and relative aggregate demand. We address issues of cointegration, general to specific modelling, dynamic specification, model evaluation and testing' parameter constancy, and exogeneity. We also test this model against existing models of Australian prices: this model encompasses (but is not encompassed by) the existing models.

ABSTRACT This paper develops an empirically constant, data-coherent, error cor rection model for inflation in Australia. The level of consumer prices is a mark-up over domestic and import costs, with adjustments for dynamics and relative aggregate demand. We address issues ofcointegration, general to specific modelling, dynamic specification, model evaluation and test ing' parameter constancy, and exogeneity. We also test this model against existing models of Australian prices: this model encompasses (but is not encompassed by) the existing models. Key words and phrases: Australia, cointegration, conditional models, CPI, dynamic specification, encompassing, error correction, exogeneity, general to specific modelling, inflation, prices, sequential reduction, vector autoregression.

Cite this document

APA

Gordon de Brouwer and Neil R. Ericsson (1995). Modelling Inflation in Australia (IFDP 1995-530). Board of Governors of the Federal Reserve System, International Finance Discussion Papers. https://whenthefedspeaks.com/doc/ifdp_1995-530

BibTeX

@techreport{wtfs_ifdp_1995_530,
  author = {Gordon de Brouwer and Neil R. Ericsson},
  title = {Modelling Inflation in Australia},
  type = {International Finance Discussion Papers},
  number = {1995-530},
  institution = {Board of Governors of the Federal Reserve System},
  year = {1995},
  url = {https://whenthefedspeaks.com/doc/ifdp_1995-530},
  abstract = {This paper develops an empirically constant, data-coherent, error correction model for inflation in Australia. The level of consumer prices is a mark-up over domestic and import costs, with adjustments for dynamics and relative aggregate demand. We address issues of cointegration, general to specific modelling, dynamic specification, model evaluation and testing' parameter constancy, and exogeneity. We also test this model against existing models of Australian prices: this model encompasses (but is not encompassed by) the existing models.},
}