Inflation expectations and low inflation in New Zealand

Ozer Karagedikli and Christopher McDermott

No DP2016/09, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: This paper finds that the changing behaviour of inflation expectations can explain much of the unusually low inflation in New Zealand. Across several empirical specifications of the Phillips curve, we observe that inflation expectations have become more backward-looking. We also find that the speed of adjustment in inflation expectations, proxied by the spread between short- and longer-term inflation expectations, can explain the unusually low inflation.

Date: 2016-06
New Economics Papers: this item is included in nep-mac and nep-mon
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Journal Article: Inflation expectations and low inflation in New Zealand (2018)
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