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Forecasting national activity using lots of international predictors: an application to New Zealand

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Author Info
Sandra Eickmeier
Tim Ng (Reserve Bank of New Zealand)

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Abstract

This paper examines the relationship between wages and consumer prices in New Zealand over the last 15 years. Reflecting the open nature of the New Zealand economy, the headline CPI is disaggregated into non-tradable and tradable prices. We find that there is a joint causality between wages and disaggregate inflation. An increase in wage inflation forecasts an increase in non-tradable inflation. However, it is tradable inflation that drives wage inflation. While exogenous shocks to wages do not help to forecast inflation, the leading relationship from wages to non-tradable inflation implies that monitoring wages may prove useful for projecting the impact of other shocks on future inflation.

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File URL: http://rbnz.govt.nz/research/discusspapers/dp09_04.pdf
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Publisher Info
Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2009/04.

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Length: 54p
Date of creation: May 2009
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Handle: RePEc:nzb:nzbdps:2009/04

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Find related papers by JEL classification:
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Schumacher, Christian, 2009. "Factor forecasting using international targeted predictors: the case of German GDP," Discussion Paper Series 1: Economic Studies 2009,10, Deutsche Bundesbank, Research Centre. [Downloadable!]
  2. Bušs, Ginters, 2009. "Comparing forecasts of Latvia's GDP using simple seasonal ARIMA models and direct versus indirect approach," MPRA Paper 16684, University Library of Munich, Germany. [Downloadable!]
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