DP2009/04

Forecasting national activity using lots of international predictors: an application to New Zealand
http://www.rbnz.govt.nz/research/discusspapers/dp09_04.pdf
By Sandra Eickmeier and Tim Ng, June 2009

We apply data-rich factor and shrinkage methods to understand how large international datasets can be used to improve forecasts of New Zealand GDP. We find that exploiting a large number of international predictors can improve forecasts compared to more traditional models based on small datasets. This is in spite of New Zealand survey data capturing a substantial proportion of the predictive information in the international data. The largest forecasting accuracy gains from including international predictors are at longer forecast horizons. The forecasting performance achievable with the data-rich methods differs widely, with shrinkage methods and partial least squares performing best. We also assess the type of international data that contains the most predictive information for New Zealand growth over our sample.

DP2009/05

Using wavelets to measure core inflation: the case of New Zealand
http://www.rbnz.govt.nz/research/discusspapers/dp09_05.pdf
By David Baqaee, June 2009
This paper uses wavelets to develop a core inflation measure for inflation targeting central banks. The analysis is applied to the case of New Zealand – the country with the longest history of explicit inflation targeting. We compare the performance of our proposed measure against some popular alternatives. Our measure does well at identifying a reliable medium-term trend in inflation. It also has comparable forecasting performance to standard benchmarks.

DP2009/06

Analysing wage and price dynamics in New Zealand
http://www.rbnz.govt.nz/research/discusspapers/dp09_06.pdf

By Ashley Dunstan, Troy Matheson and Hamish Pepper, June 2009

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.

ENDS

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