Forecasting national activity using lots of international predictors: an application to New Zealand

Sandra Eickmeier and Tim Ng ()

No DP2009/04, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: This paper examines the relationship between wages and consumer prices in New Zealand over the last 15 years. Reflecting the open nature of the New Zealand economy, the headline CPI is disaggregated into non-tradable and tradable prices. We find that there is a joint causality between wages and disaggregate inflation. An increase in wage inflation forecasts an increase in non-tradable inflation. However, it is tradable inflation that drives wage inflation. While exogenous shocks to wages do not help to forecast inflation, the leading relationship from wages to non-tradable inflation implies that monitoring wages may prove useful for projecting the impact of other shocks on future inflation.

JEL-codes: C53 F47 C33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-for
Date: 2009-05
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Working Paper: Forecasting national activity using lots of international predictors: an application to New Zealand (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:nzb:nzbdps:2009/04

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