Using the Taylor Rule to investigate the Australian model, Dennis (2003) finds that both inflation and the real exchange rate volatility are the focus when setting interest rates. Using a modified Taylor Rule,Mohanty and Klau (2004) take into account inflation gap, output gap, lagged interest rates with current and lagged real exchange rate changes; results reveal that the central bank responds to the inflation gap, output gap and real exchange rate when setting interest rates for 10 out of 13 EMEs, and that the policy response to the exchange rate changes is recurrently larger compared with the response to the other two (inflation and output gaps)