Abstract:
The article is based on empirical data from Australian Economy. It made an
attempt to evaluate the success of Reserve Bank of Australia (RBA) in controlling inflation by
aggressively using cash rate. The main objective of the research is to find out the relationship
of RBA’s monetary policy with Taylor Rule; whether it follows the Taylor Rule mechanically
or uses a different form (e.g. forward looking) or depends on other factors as well. Other
models have been used for estimation and the results are analyzed subsequently. The
evidences from the test results suggest the successful implementation of interest rate rule by
the Reserve Bank to stabilize the inflationary pressure in terms of forward looking
perspective.
