THE ENDS OF 3 SMALL INFLATIONS - AUSTRALIA, NEW-ZEALAND AND CANADA

The increase in the independence of the Reserve Bank of New Zealand in 1989 allows a test of the theoretical implications of the central ban k independence literature. Furthermore, the similar inflationary exper iences of Australia and Canada provide a rare set of controls. This pa per shows that in the short term, the costs of disinflation have not b een less in New Zealand than in Australia, and that in Canada, where i ncreased credibility was only supported by rhetoric and not legislatio n, the costs were higher. However, other concurrent reforms in New Zea land may have clouded the picture and the true test may be the path of inflation in the three countries as the economies continue to recover .