Exploring the Nexus between Inflation and Globalization Under Inflation Targeting Through the Lens of New Zealand's Experience

20 Pages Posted: 5 May 2017 Last revised: 31 May 2017

See all articles by Ayşe Kabukcuoglu Dur

Ayşe Kabukcuoglu Dur

North Carolina State University; North Carolina State University - Department of Economics

Enrique Martínez-García

Federal Reserve Bank of Dallas - Research Department

Mehmet Soytas

King Fahd University of Petroleum and Minerals; Center for Economics and Econometrics; Global Labor Organization

Multiple version iconThere are 2 versions of this paper

Date Written: March, 2017

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 Classification: C21, C23, C53, F41, F47, F62

Suggested Citation

Kabukçuoğlu Dur, Ayşe and Kabukçuoğlu Dur, Ayşe and Martinez-Garcia, Enrique and Soytas, Mehmet, Exploring the Nexus between Inflation and Globalization Under Inflation Targeting Through the Lens of New Zealand's Experience (March, 2017). Globalization and Monetary Policy Institute Working Paper No. 308, Available at SSRN: https://ssrn.com/abstract=2962913 or http://dx.doi.org/10.24149/gwp308

Ayşe Kabukçuoğlu Dur (Contact Author)

North Carolina State University ( email )

2801 Founders Dr
Raleigh, NC 27695
United States

HOME PAGE: http://aysekabukcuoglu.weebly.com

North Carolina State University - Department of Economics ( email )

Raleigh, NC 27695-8110
United States

HOME PAGE: http://aysedur.com

Enrique Martinez-Garcia

Federal Reserve Bank of Dallas - Research Department ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5262 (Phone)

HOME PAGE: http://sites.google.com/view/emgeconomics

Mehmet Soytas

King Fahd University of Petroleum and Minerals ( email )

United States
0546243550 (Phone)
31262 (Fax)

HOME PAGE: http://https://sites.google.com/view/mehmetalisoytas/

Center for Economics and Econometrics ( email )

Bogazici Universitesi
Bebek
Istanbul, 34342
Turkey

HOME PAGE: http://https://cee.boun.edu.tr/content/mehmet-ali-soyta%C5%9F

Global Labor Organization ( email )

Collogne
Germany

HOME PAGE: http://https://glabor.org/user/mehmets/

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