The steady inflation rate of economic growth

This paper considers the existence of a path of GDP corresponding To steady inflation in the prices of domestic goods. We estimate the steady inflatio n 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 non linear combination of growth and changes in import price inflation. Because import price inflation is more volatile than overall inflation, policy tha t targets overall inflation may require growth to fluctuate considerably, w hereas growth can be steady if the target is steady inflation of domestic g oods' prices.