Abstract
ABSTRACTWe document the experience of the Reserve Bank of New Zealand in changing its inflation target, particularly the effects on inflation expectations. First, the Reserve Bank of New Zealand's dynamic stochastic general equilibrium model is used to highlight expectation formation in the transmission following a change in the inflation target. Second, a Nelson–Siegel model is used to combine a number of inflation expectation surveys into a continuous curve where expectations can be plotted as a function of the forecast horizon. Using estimates of long-run inflation expectations derived from the Nelson–Siegel model, we find that numerical changes in the inflation target result in an immediate change in inflation expectations.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
