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A new core inflation indicator for New Zealand

  • Domenico Giannone
  • Troy Matheson

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.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/6407.

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Date of creation: 2007
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Publication status: Published in: International Journal of Central Banking (2007) v.3 n° 4,p.145-180
Handle: RePEc:ulb:ulbeco:2013/6407
Contact details of provider: Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be

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  1. Mario Forni & Domenico Giannone & Marco Lippi & Lucrezia Reichlin, 2008. "Opening the Black Box: Structural Factor Models with Large Cross-Sections," Working Papers ECARES 2008_036, ULB -- Universite Libre de Bruxelles.
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  6. Domenico Giannone & Troy D. Matheson, 2007. "A New Core Inflation Indicator for New Zealand," International Journal of Central Banking, International Journal of Central Banking, vol. 3(4), pages 145-180, December.
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  17. Chong, Yock Y & Hendry, David F, 1986. "Econometric Evaluation of Linear Macro-Economic Models," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 671-90, August.
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  23. Mark A. Wynne, 1997. "Measuring short-run inflation for central bankers - commentary," Review, Federal Reserve Bank of St. Louis, issue May, pages 161-167.
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