Drivers of the 2020s inflation cycle: SVAR evidence from New Zealand (with Trent Lockyer)-forthcoming RBNZ Discussion Paper
This paper investigates the drivers of New Zealand’s inflation during the COVID-19 era using an SVAR model identified via zero, sign, and narrative restrictions. The model yields theoretically consistent responses to demand shocks, while global supply shocks induce a persistent, hump-shaped inflationary response alongside a contraction in real GDP. The central bank reacts with a modest easing of the policy rate to mitigate recessionary risks, effectively looking through the initial supply-side inflation. Our historical decomposition shows that the 2021 inflation surge was driven primarily by global supply chain disruptions, with these inflationary pressures further exacerbated by a rebound in global goods demand and rising oil prices in 2022. Post-pandemic disinflation is attributed to the easing of these global factors, while aggressive monetary tightening has likely diminished the contribution of domestic demand shocks to inflation.
Migration and the New Zealand economy: Evidence from sign-restricted SVARs (with India Power and Adam Richardson)-RBNZ Discussion Paper (Media coverage)
We investigate the impact of immigration shocks on the New Zealand macroeconomy in sign restricted Bayesian SVAR models. Our findings indicate that an expansionary immigration shock results in a rise in real GDP, participation rate, house prices, and household credit while real wages and unemployment fall. We do not report evidence of a significant increase in consumer prices and labour productivity, except for a marginally significant rise in prices of nontradables.