Evaluation of Inflation Targeting Policy in Australia and Canada

Running head: ECONOMICS
Economics
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ECONOMICS1
Table of Contents
Evaluation of inflation targeting policy in Australia and Canada...................................................2
Australia.......................................................................................................................................2
Impact of inflation targeting policy on macroeconomic variables..............................................2
Canada.........................................................................................................................................5
Impact of inflation targeting policy on macroeconomic variables..............................................5
Comparative analysis between Australia and Canada.................................................................7
References........................................................................................................................................9

ECONOMICS2
Evaluation of inflation targeting policy in Australia and Canada
Australia
In Australia, the inflation targeting policy is used as the main framework in designing
monetary policy. Following the decision of central banks of different countries, the Reserve
Bank of Australia adapted inflation targeting policy in 1990s (Debelle, 2016). In 1996,
understanding the importance of inflation targeting policy government and RBA formalized the
monetary policy agreement in a statement on the conduct of monetary policy.
Impact of inflation targeting policy on macroeconomic variables
Table 1: Summary statists of macroeconomic variables pre and post inflation target
(Source: rba.gov.au, 2019)
Price stability
Since the adaption of inflation targeting policy, rate of consumer price inflation termed as
headline inflation in Australia has remained within the targeted range. The inflation expectation
is also within the targeted limit. It is the responsibility of Reserve bank to monitor closely the on-
going inflation trend in the economy. This excludes items, which have particularly high or low