 Inflation Targets and the Yield Curve: New Zealand and Australia vs. the USNo 25, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney Abstract: This study considers whether the slope of the yield curve for New Zealand contains useful economic information. In order to provide some perspective, the present study also contrasts the New Zealnd experience with evidence based on US and Australian data. The princial findings of this study are as follows: - At short horizons, typically 2 years or less, the term structure for New Zealand behaves as in the expectations hypothesis of the term structure. - Nevertheless, there are departures from the expectations hypothesis, especially in the period when inflation objectives in New Zealand were on a declining path. Moreover, the policies of the US had a critically important impact around 1993-94. - Some evidence was found of an effect from the spread to future inflation but only when the headline CPI is used to measure inflation; the links disappear entirely once CPI ex credit costs are employed. The study argues that such results are consistent with a credible inflation targeting regime so that term structure serves possibly to signal changes in real interest rates rather than inflation in New Zealand. - There is good evidence that the spread helps predict future output in New Zealand, although the effect seems to dissipate after one year. once we distinguish between periods of positive versus negative growth rates in real GDP, the spread influences output up to two years into the future. Also, when output growth is measured asymmetrically, rising inflation expectations depress output growth. JEL-codes: C22 C23 C32 C33 E43 (search for similar items in EconPapers) Published as: Siklos, P., 2000, "Inflation Targets and the Yield Curve: New Zealand and Australia vs. the US", International Journal of Finance and Economics, 5(1), 15-32. There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:uts:rpaper:25 Access Statistics for this paper More papers in Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney PO Box 123, Broadway, NSW 2007, Australia. Contact information at EDIRC. |
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