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Oil and petrol prices, inflation perceptions, and inflation expectations: evidence from New Zealand
Journal article   Open access   Peer reviewed

Oil and petrol prices, inflation perceptions, and inflation expectations: evidence from New Zealand

Puneet Vatsa
Applied Economics, Vol.58(11), pp.2109-2120
2026
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Oil and petrol prices inflation perceptions and inflation expectations evidence from New Zealand2.06 MBDownloadView
Published Version (Advanced Access)CC BY-NC-ND V4.0 Open Access

Abstract

petrol prices oil prices inflation expectations inflation perceptions New Zealand
I use a structural vector autoregression model to analyse the links between oil prices, petrol prices, inflation, inflation perceptions, and inflation expectations in New Zealand. Findings reveal that although inflation expectations are sensitive to shocks to oil prices, petrol prices, and inflation itself, they are considerably more sensitive to inflation perception shocks. Shocks to inflation perceptions explain 54% of the forecast error variance in inflation expectations after one quarter and 37% after 18 months. The results underscore the importance of including inflation perceptions in models seeking to account for inflation expectations and their associations with energy prices.

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