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The Steady Inflation Rate of Economic Growth
Author(s) -
DUNGEY MARDI,
PITCHFORD JOHN
Publication year - 2000
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2000.tb00035.x
Subject(s) - economics , inflation (cosmology) , monetary policy , monetary economics , float (project management) , inflation rate , real interest rate , growth rate , economic stability , macroeconomics , keynesian economics , mathematics , physics , geometry , management , theoretical physics
This paper considers the existence of a path of GDP corresponding to steady inflation in the prices of domestic goods. We estimate the steady inflation rate of growth, denoted the SIRG, at a little over 4 per cent p.a. in the post‐float period in Australia. Changes in inflation are modelled as a nonlinear combination of growth and changes, in import price inflation. Because import price inflation is more volatile than overall inflation, policy that targets overall inflation may require growth to fluctuate considerably, whereas growth can be steady if the target is steady inflation of domestic goods' prices.