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RBA Glossary definition for inflation target

inflation target – A tool to guide monetary policy expressed as a preferred range or figure for the rate of increase in prices over a period. In Australia, the inflation target is between 2 and 3 per cent per annum on average over the course of the business cycle.

RBA Glossary definition for inflation

inflation – A measure of the change (increase) in the general level of prices.

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Models of Inflation Regimes

1 May 1997 RDP 9701
Joseph E. Gagnon
Expected inflation in subsequent periods is a weighted average of the current inflation target and the expected value of future inflation targets, as shown by Equations (4) and (5). ... Expected inflation more than one period ahead is a weighted average
https://www.rba.gov.au/publications/rdp/1997/9701/model.html

Literature Review

1 May 1997 RDP 9701
Joseph E. Gagnon
More recently, attention has focused on the adoption of explicit inflation targets by a number of central banks. ... Walsh (1995) discusses the circumstances under which explicit inflation targets and enforcement clauses in the central bank governor's
https://www.rba.gov.au/publications/rdp/1997/9701/literature-review.html

Introduction and Summary

1 May 1997 RDP 9701
Joseph E. Gagnon
In the event, the central inflation target has been raised slightly, from 1 to 1.5 per cent. ... Moreover, there was a possibility that an even greater increase in the inflation target might have resulted after the election.
https://www.rba.gov.au/publications/rdp/1997/9701/introduction.html

Interpretations and Extensions

1 May 1997 RDP 9701
Joseph E. Gagnon
Even when agents understand and believe in the central bank's target inflation rate, they must attach some probability to a change in the regime. ... If the current regime inflation target is equal to this long-run inflation mean, then policy is credible
https://www.rba.gov.au/publications/rdp/1997/9701/interpretations-extensions.html

Empirical Support

1 May 1997 RDP 9701
Joseph E. Gagnon
For example, ADF tests on quarterly US inflation reject a unit root between 1954 and 1966 and also between 1984 and 1996. ... inflation target – then the mean 10-year-ahead inflation rate would drop to around 3 per cent and the mode would drop to below
https://www.rba.gov.au/publications/rdp/1997/9701/empirical-support.html

References

1 May 1997 RDP 9701
Joseph E. Gagnon
Ulph (1990), ‘Costs of Inflation’ in B.M. Friedman and F.H. Hahn (eds.), Handbook of Monetary Economics, vol. ... 195–215. OECD (1996), Economic Outlook, December. Reserve Bank of New Zealand (1996), Policy Targets Agreement, December.
https://www.rba.gov.au/publications/rdp/1997/9701/references.html