{"title":"The Time-Varying Anchoring of Inflation Expectations in Australia","authors":"Thuy Hang Duong","doi":"10.1111/1467-8462.70020","DOIUrl":null,"url":null,"abstract":"<p>This paper examines the anchoring of inflation expectations in Australia, an important indicator of the Reserve Bank of Australia's (RBA) credibility in the public's eyes regarding its inflation mandate. Rather than treating anchoring as a binary state, the study examines its evolution over time. The positive responsiveness of long-term expectations held by union officials and bond investors to actual inflation suggests that the RBA is midway towards completely anchoring public expectations. Estimates from the time-varying VAR model with stochastic volatility indicate a gradual strengthening of anchoring since 1996, reflecting growing credibility under inflation targeting. These findings highlight the importance of continued credibility gains to strengthen the expectations channel.</p>","PeriodicalId":46348,"journal":{"name":"Australian Economic Review","volume":"59 1","pages":"59-74"},"PeriodicalIF":1.0000,"publicationDate":"2026-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/1467-8462.70020","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Australian Economic Review","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/1467-8462.70020","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"2025/7/23 0:00:00","PubModel":"Epub","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
This paper examines the anchoring of inflation expectations in Australia, an important indicator of the Reserve Bank of Australia's (RBA) credibility in the public's eyes regarding its inflation mandate. Rather than treating anchoring as a binary state, the study examines its evolution over time. The positive responsiveness of long-term expectations held by union officials and bond investors to actual inflation suggests that the RBA is midway towards completely anchoring public expectations. Estimates from the time-varying VAR model with stochastic volatility indicate a gradual strengthening of anchoring since 1996, reflecting growing credibility under inflation targeting. These findings highlight the importance of continued credibility gains to strengthen the expectations channel.
期刊介绍：
An applied economics journal with a strong policy orientation, The Australian Economic Review publishes high-quality articles applying economic analysis to a wide range of macroeconomic and microeconomic topics relevant to both economic and social policy issues. Produced by the Melbourne Institute of Applied Economic and Social Research, it is the leading journal of its kind in Australia and the Asia-Pacific region. While it is of special interest to Australian academics, students, policy makers, and others interested in the Australian economy, the journal also considers matters of international interest.
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