Exploring the Nexus between Inflation and Globalization under Inflation Targeting through the Lens of New Zealand’s Experience

Ayşe Kabukçuoğlu Dur, Enrique Martínez-García () and Mehmet Ali Soytas ()
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Enrique Martínez-García: Federal Reserve Bank of Dallas and Southern Methodist University
Mehmet Ali Soytas: Ozyegin University
Authors registered in the RePEc Author Service: Enrique Martínez García ()

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: We investigate empirically the inflation dynamics in New Zealand, a small open economy and a pioneer in inflation targeting, under various open-economy Phillips curve specifications. Our forecasting exercise suggests that open-economy Phillips curves under standard measures of global slack do not help forecast domestic inflation, possibly indicating measurement problems with global slack itself. In turn, under a stable inflation target we still find that (i) global inflation or (ii) global inflation or oil prices have information content for headline CPI and core CPI inflation over the 1997:Q3-2015:Q1 period and appear to be reliable proxies for global slack in forecasting inflation.

Keywords: Inflation Dynamics; Open-Economy Phillips Curve; Inflation Targeting; Inflation Forecasting. (search for similar items in EconPapers)
JEL-codes: C21 C23 C53 F41 F47 F62 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2017-04
New Economics Papers: this item is included in nep-mon
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Working Paper: Exploring the Nexus Between Inflation and Globalization Under Inflation Targeting Through the Lens of New Zealand’s Experience (2017)
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