New Zealand: Selected Issues
IMF Staff Country Reports, May 14, 2024
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- New Zealand: Selected Issues
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Bibliographic details
- Published: May 14, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400275302.002
Research questions and hypotheses
- Investigates why New Zealand’s inflation is higher and further from target than comparator economies.
- Tests two main hypotheses:
- (1) the persistence of pandemic era shocks;
- (2) strong migration inflows fuelling demand.
Identified drivers of higher inflation
- Common drivers across many advanced economies:
- expansionary fiscal and monetary policy;
- high global commodity prices;
- exchange rates;
- high maritime transport costs.
- New Zealand-specific factor:
- the delayed reopening of the economy likely caused a postponed demand shock relative to similar economies.
- Dynamics:
- results show that the impact of these shocks decay rapidly over time, suggesting positive short-term inflation dynamics.
Migration: short-run effects
- Large migration waves are associated with short-run increases in inflation.
- Magnitude and persistence:
- these inflationary effects are relatively modest;
- these effects are no longer significant after four years.
Migration: long-run effects
- Long-run dynamics show evidence that migration can lead to significant long-term gains to:
- productivity;
- output;
- capital growth.
Interaction with labor market conditions
- Countries with tight labor markets exhibit similar patterns to those without tight labor markets.
- Difference in timing:
- in tight labor markets, the inflationary effects of migration dissipate faster.
Source: New Zealand: Selected Issues, IMF Staff Country Reports No. 2024/123, May 14, 2024.
Content in this bundle
- New Zealand: Selected Issues; IMF Country Report No. 24/123; April 23, 2024