A New Core Inflation Indicator for New Zealand

35 Pages Posted: 30 May 2008

See all articles by Domenico Giannone

Domenico Giannone

Federal Reserve Banks - Federal Reserve Bank of New York; Centre for Economic Policy Research (CEPR)

Troy Matheson

Government of New Zealand - Department of Economics

Date Written: September 2007

Abstract

This paper introduces a new indicator of core inflation for New Zealand, estimated using a dynamic factor model and disaggregate consumer price data. Using disaggregate consumer price data we can directly compare the predictive performance of our core indicator with a wide range of other 'core inflation' measures estimated from disaggregate consumer prices, such as the weighted median and the trimmed mean. The medium term inflation target of Reserve Bank of New Zealand is used as a guide to define our target measure of core inflation - a centered 2 year moving average of past and future inflation outcomes. We find that our indicator produces relatively good estimates of this characterisation of core inflation when compared with estimates derived from a range of other models.

Keywords: Core inflation, Monetary policy

JEL Classification: C32, E31, E32, E52

Suggested Citation

Giannone, Domenico and Matheson, Troy, A New Core Inflation Indicator for New Zealand (September 2007). CEPR Discussion Paper No. DP6469. Available at SSRN: https://ssrn.com/abstract=1138582

Domenico Giannone (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Troy Matheson

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

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