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A New Core Inflation Indicator for New Zealand

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  • Giannone, Domenico
  • Matheson, Troy

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.

Suggested Citation

  • Giannone, Domenico & Matheson, Troy, 2007. "A New Core Inflation Indicator for New Zealand," CEPR Discussion Papers 6469, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:6469
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    References listed on IDEAS

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    More about this item

    Keywords

    Core inflation; Monetary policy;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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