Analysing wage and price dynamics in New Zealand
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.
|Date of creation:||Jun 2009|
|Date of revision:|
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- MacKinnon, James G, 1996.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
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- Troy Matheson, 2006.
"Phillips curve forecasting in a small open economy,"
Reserve Bank of New Zealand Discussion Paper Series
DP2006/01, Reserve Bank of New Zealand.
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- Andrew Coleman & Brian Silverstone, 2007. "Price changes by firms in New Zealand - some evidence from the Quarterly Survey of Business Opinion," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, September.
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