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The inflation-output trade-off: Is the Phillips Curve symmetric? A policy lesson from New Zealand Author info | Abstract | Publisher info | Download info | Related research | Statistics Weshah Razzak (Reserve Bank of New Zealand )
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New Zealand data show that the inflation-output relationship is asymmetric. This asymmetry implies that positive demand shocks tend to increase inflation by more than negative demand shocks of similar magnitudes reduce it. An important implication of this asymmetry is that a monetary authority with the objective of maintaining the inflation rate within a narrow band needs to react more promptly to demand shocks than otherwise be necessary. Alternatively, policy that is slow to respond to demand disturbances will result in higher inflation, and greater losses of output than would be the case with a linear Phillips curve.
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Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number
G97/2.
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Length: 25p
Date of creation: Jan 1997Date of revision:
Handle: RePEc:nzb:nzbdps:1997/02Contact details of provider: Postal: P.O. Box 2498, Wellington Phone: 64 4 471-3767 Fax: 64 4 471-2270 Email: Web page: http://www.rbnz.govt.nz More information through EDIRC
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Find related papers by JEL classification: C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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