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Using wavelets to measure core inflation - the case of New Zealand

David Baqaee

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.
Baqaee, David (2010). ‘Using wavelets to measure core inflation: The case of New Zealand’, The North American Journal of Economics and Finance, Elsevier, Volume 21(3), Pages 241-255, DOI: