RDP 2017-02: Anticipatory Monetary Policy and the ‘Price Puzzle’ Appendix B: Additional Results

Figure B1: Effect of Monetary Policy on the Price Level – FAVAR
Response to a temporary 1 percentage point shock
Figure B1: Effect of Monetary Policy on the Price Level – FAVAR

Notes: Price level is the cumulated response of underlying inflation; the IRFs are identified using a Cholesky decomposition with ordering: US GDP, commodity prices, GDP, underlying inflation, factor variable 1, factor variable 2, the cash rate, and the real TWI; confidence bands indicate 90 per cent intervals; sample period is 1990:Q2–2015:Q4

Sources: ABS; Authors' calculations

Table B1: Determinants of the Change in the Cash Rate
  Coefficient Standard error
Underlying inflation Inline Equation −0.05 0.05
Real GDP growth Inline Equation 0.05 0.03
Change in forecasts relative to previous forecast round
Underlying inflation Inline Equation 0.24*** 0.08
Real GDP growth Inline Equation 0.01 0.05
Unemployment rate nowcast Inline Equation 0.00 0.01
Cash rate prior to meeting (rm − 1) 0.01 0.02
Constant (α) −0.10 0.19

Notes: Adjusted R2 = 0.20, Durbin-Watson = 1.90, No = 100; *, ** and *** indicate significance at the 10, 5 and 1 per cent level, respectively; Newey-West HAC standard errors

Sources: ABS; Authors' calculations; RBA