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2017•New Zealand Economic PapersRequires access

Inflation expectations and low inflation in New Zealand

Özer Karagedikli, C. John McDermott

Open publisher page 5 citations

Abstract

This paper finds that the changing behaviour of inflation expectations can explain much of the unusually low inflation in New Zealand. Across several empirical specifications of the Phillips curve, we observe that inflation expectations have become more backward-looking. We also find that the speed of adjustment in inflation expectations, proxied by the spread between short- and longer-term inflation expectations, can explain the unusually low inflation.

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What this paper is about

This paper finds that the changing behaviour of inflation expectations can explain much of the unusually low inflation in New Zealand. Across several empirical specifications of the Phillips curve, we observe that inflation expectations have become more backward-looking. We also find that the speed of adjustment in inflation expectations, proxied by the spread between short- and longer-term inflation expectations, can explain the unusually low inflation.

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OpenAlex reports 5 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This paper finds that the changing behaviour of inflation expectations can explain much of the unusually low inflation in New Zealand. Across several empirical specifications of the Phillips curve, we observe that inflation expectations have become more backward-looking. We also find that the speed of adjustment in inflation expectations, proxied by the spread between short- and longer-term inflation expectations, can explain the unusually low inflation.

Key concepts: Inflation (cosmology), Economics, Phillips curve, Keynesian economics, Real interest rate, Monetary economics, Monetary policy, Inflation targeting

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