Analysing wage and price dynamics in New Zealand

Ashley Dunstan, Troy D. Matheson () and Hamish Pepper
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Hamish Pepper: Reserve Bank of New Zealand

No DP2009/06, 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: C32 E24 E31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-lab and nep-mac
Date: 2009-06
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Persistent link: http://EconPapers.repec.org/RePEc:nzb:nzbdps:2009/06

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