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). 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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