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 Soytas ()

No 308, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

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 and (ii) global inflation and 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.

JEL-codes: C21 C23 C53 F41 F47 F62 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2017-03-01
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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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:308

DOI: 10.24149/gwp308

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