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

Release date
01/06/2009
Reference
DP2009/05
Author
David Baqaee
Published as
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: https://doi.org/10.1016/j.najef.2010.03.003.
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.