Show simple item record

dc.contributor.authorLiu, Philipen_NZ
dc.identifier.citationLiu, P. (2003, October). Improving inflation targeting in New Zealand: An investigation of the Reserve Bank’s inflation errors (Dissertation, Bachelor of Commerce with Honours). Retrieved from
dc.description.abstractIn this project, we investigate New Zealand's rate of inflation and its deviations from target using two new methods. Firstly, Rowe's (2002) method of examining the correlations between inflation deviations from target and indicators where any significant correlations, whether in a simple or multivariate framework, will be evidence against an optimal policy setting; secondly, we test Cukierman and Gerlach's (2003) and Ruge-Murcia's (2001) new inflation bias hypothesis for New Zealand. In contrast to Kydland and Prescott's (1977) and Barro and Gordon's (1983) time inconsistency explanation of inflation bias, Ruge-Murcia, Cukierman and Gerlach postulates that even if central banks target the natural rate of unemployment or the potential level of output, some inflation bias could still exist if their loss function is asymmetric. Finally this study looks at how actual inflation error from 1982 to 2003 could help improve inflation targeting for the Reserve Bank of New Zealand in the futureen_NZ
dc.subjectrate of inflationen_NZ
dc.subjectNew Zealanden_NZ
dc.subjectdeviations from targeten_NZ
dc.subjectinflation bias hypothesis for New Zealanden_NZ
dc.subjectinflation deviations from target and indicatoren_NZ
dc.subjectReserve Bank of New Zealanden_NZ
dc.subject.lcshHF Commerceen_NZ
dc.subject.lcshHF5601 Accountingen_NZ
dc.subject.lcshHC Economic History & Conditionsen_NZ
dc.subject.lcshH Social Sciences (General)en_NZ
dc.subject.lcshHB Economic Theoryen_NZ
dc.titleImproving inflation targeting in New Zealand: An investigation of the Reserve Bank's inflation errorsen_NZ
otago.schoolEconomicsen_NZ of Commerce with Honours of Otagoen_NZ Dissertationsen_NZ
otago.openaccessAbstract Only
dc.description.referencesBarro, R. and D. Gordon, (1983), "A positive theory of monetary policy in a natural rate model", Journal of Political Economy, Vol. 91, 589-610. Blinder, A.S. (1998), "Central banking in theory and practice", The MIT Press: Cambridge, MA. Cukierman, A. (1999), "The inflation bias revisited", Tel-Aviv University, Working Paper, No. 38-1999. Cukierman A, and A.V. Muscatelli (2002), "Do central banks have precautionary demands for expansions and for price stability? — Theory and evidence", University of Glasgow, Department of Economics, Working Paper, No. 2002-4. Cukierman, A. and S. Gerlach (2003), "The inflation bias revisited: Theory and some international evidence", The Manchester School, Vol. 71, Issue 5, 541-565. Gerlach, S. (2000), "Asymmetric policy reactions and inflation", Bank for International Settlements, Working Paper. Hendry, D.F. and H.M. Krolzig (2001), Automatic Econometric Model Selection Using PcGets, Timberlake Consultants Ltd, London. Kareken, J. and R.M. Solow (1963), "Lags in monetary policy," In: Stabilisation Policies: A series of research studies prepared for the Commission on Money and Credit, Englewood Cliffs, N.J.: Prentice-Hall. King, M. (1996), "How should central banks reduce inflation: Conceptual issues", Achieving Price Stability, Federal Reserve Bank of Kansas City. Kydland, F. and E. Prescott (1977), "Rules rather than discretion: The inconsistency of optimal plans", Journal of Political Economy, Vol. 85, 473-490. McCallum, B.T. (1995), "Two fallacies concerning central bank independence", American Economic Review Papers and Proceedings, Vol.85, 201-211. McCaw, S. and S. Ranchhod (2002), "The Reserve Bank's recent forecasting performance," Reserve Bank of New Zealand Bulletin, 65, No. 4, 3-23. Mylonas, P. and S. Schich (1999), "The use of financial market indicators by monetary authorities," OECD Economics Department, Working Papers, No. 223. Owen, P.D. (2003), "General-to-specific modelling using PcGets," Journal of Economic Surveys, Vol. 17, No. 4, 609-628. Pagan, A. (1984), "Econometric issues in the analysis of regressions with generated regressors", International Economic Review, Vol. 25, No. 1, 221-247. Peston, M.H. (1972), "The correlation between targets and instruments," Economica, Vol. 29, 427-431. Razzak, W.A. (2001), "Money in the era of inflation targeting, " Reserve Bank of New Zealand, Discussion Paper, 2001/02. Romer, D. (2001), Advanced Macroeconomics 2nd Edition, Boston: McGraw-I-Iill. Rowe, N. (2002), "How to improve inflation targeting at the Bank of Canada, " Bank of Canada, Working Paper, 2002-23. Ruge-Murcia, F.J. (2001), "The inflation bias when the central targets the natural rate of unemployment", Universite de Montreal, Department de Sciences Economiques, Working paper, No. 22-2001. Svensson, L.E.O. (1997b), "Inflation targeting in an open economy: strict or flexible inflation targeting?", Reserve Bank of New Zealand, Discussion Paper, 1997/08. Varian, H. (1975), "A Bayesian approach to real estate assessment", Studies in Bayesian Economics in Honor of L. J. Savage, edited by S. E. Reinberg and A. Zellner, North- Holland: Amsterdam. Worswick, G.D.N. (1969), "Fiscal policy and stabilisation in Britain", Journal of Money, C'redit and Banking, Vol. 1, Issues 3, 474-495. Brockwell, P.J. and R.A. Davis (1987), Time Series: Theory and Methods, New York, Berlin: Springer-Verlag. Fuller, W.A. (1987), Measurement Error Models, New York, John Wiley & Sons, Chapter 1 and 2, 1-184. Gauger, J. (1989), "The generated regressor correction: Impacts upon inferences in hypothesis testing", Journal of Macroeconomics, Vol. 11, No. 3, 383-395. Harris, L. (1981), Monetary Theory, New York, McGraw-Hill. McAleer, M. and J. Smith (1994), "Newey-West covariance matrix estimates for models with generated regressors", Applied Economics, Vol. 26, 635-640. Owen, P.D. and C.R. Weatherston (2002), "Uncertainty of outcome and Super 12 rugby union attendance: Application of a general-to-specific modelling strategy," University of Otago, Department of Economics, Discussion Paper, No. 0211, (forthcoming, Journal of Sports Economics). Pagan, A. and A. Ullah (1988), "The econometric analysis of models with risk terms," Journal of Applied Econometrics, Vol. 3, 87-105. Peel, D.A. and A.R. Nobay (2000), "Optimal monetary policy with a nonlinear Phillips curve", Economics Letters, Vol. 67, 459-164. Rilstone, P. (1996), "Nonparametric estimation of models with generated regressors", International Economics Review, Vol. 37, No. 2, 299-308. Rowe, N. and J. Yetman (2000), "Identifying policy-makers' objectives: An application to the Bank of Canada," Bank of Canada, Working Paper, 2000-11. Svensson, L.E.O. (1997a forthcoming), "Inflation forecast targeting: implementing and monitoring inflation targets", European Economic Review, Vol. 41, 1111-1146.en_NZ
 Find in your library

Files in this item


There are no files associated with this item.

This item is not available in full-text via OUR Archive.

If you would like to read this item, please apply for an inter-library loan from the University of Otago via your local library.

If you are the author of this item, please contact us if you wish to discuss making the full text publicly available.

This item appears in the following Collection(s)

Show simple item record