Authors struggle to cut ‘price puzzle’ from Australian data
Authors find various approaches to removing the puzzle from VAR models fail for Australian data
A study by economists at the Reserve Bank of Australia (RBA) finds it is difficult to eliminate the “price puzzle” from models based on Australian data, even though such approaches work elsewhere.
The paper, Anticipatory Monetary Policy and the ‘Price Puzzle’, by James Bishop and Peter Tulip, outlines various approaches to tackling the puzzle, in which models predict that a hike in interest rates will cause inflation to rise, not fall.
Earlier research suggests the puzzle may emerge because of
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