acquisitions approach to inflation targetting? (1 Viewer)

[simsimsimsimsim]

hey guys... just a quick question

whats the advaantages of using an acquisitions approach to inflation targeting over the underlying inflation rate?

 

[mrhorseham]

im not really sure the ans to ur question, but this has some info
http://www.rba.gov.au/Education/UnderstandingStatistics/box_d_bu_1198_1.pdf

 

[gnrlies]

hey guys... just a quick question

whats the advaantages of using an acquisitions approach to inflation targeting over the underlying inflation rate?

Well firstly there is no such thing as an acquisitions approach to inflation targeting.

I am not sure what you are asking either, but it is true that the ABS changed its measurement of the CPI to what it called an acquisitions approach which essentially meant that it removed the feedback loops that saw interest rate rises contributing to inflation. In particular it removed costs assosciated with housing such that the CPI measured housing costs in terms of dwelling costs rather including the total costs assosciated with servicing mortgages.

Because the RBA was targeting inflation it would not make sense to implement a policy that could actually contribute to inflation. Because increased mortgage costs is one of the channels through which monetary policy works, it would be silly to include these costs in the CPI. This is theoretically sound because the rise in interest rates is an isolated event due to monetary policy and not general inflation.

Nonetheless this is not something you need to know for the HSC.

EDIT: I should also give credit to the above post as the link does a good job in discussing the issue.

 

[alex1992]

Gnriles,

I am afraid that your response is simplistic.

You have unfortunately disregarded the fact that the RBA has sought to measure inflation to its utmost possible accuracy. Adopting this new measure is indeed believed to be a more appropraite tool for measuring inflation.

Futher, it could be argued that the RBA has sough to, in essence, eliminate the murky beliefs surrounding the estimation of inflation, and has thus sought to cyrstalise its measures of inflation, thus allowing increased transparency in its methods, as part of a wider goal to establish an economic framework that is beneficial to a industrialised economy such as that of Australia.

 

[gnrlies]

Gnriles,

I am afraid that your response is simplistic.

You have unfortunately disregarded the fact that the RBA has sought to measure inflation to its utmost possible accuracy. Adopting this new measure is indeed believed to be a more appropraite tool for measuring inflation.

Futher, it could be argued that the RBA has sough to, in essence, eliminate the murky beliefs surrounding the estimation of inflation, and has thus sought to cyrstalise its measures of inflation, thus allowing increased transparency in its methods, as part of a wider goal to establish an economic framework that is beneficial to a industrialised economy such as that of Australia.

sorry mate, who are you?

 

[alex1992]

Gnriles,

i am a yr12 economics student.

Your point being?

 

[gnrlies]

Gnriles,

i am a yr12 economics student.

Your point being?

Well then stop acting like a smartarse.

 

[drewgcn]

You realise he's just baiting you? Look at his other posts.

 

[Scrub Ya Flaps]

Gnriles,

i am a yr12 economics student.

Your point being?

I hope his point alludes to the fact your a moron trying to acting older than you are. Give it up troll