Inflation and migration: Theory, evidence and implications for the Monetary Policy Committee

March 20, 2024

The Reserve Bank of New Zealand  engaged NZIER to undertake a targeted literature review on the relationship between inflation and migration and the implications for monetary policy. 

Net migration to New Zealand is currently at record levels. The overall impact of migration on the economy, and thus the monetary policy implications, is a balance between supply effects (more labour) and demand effects (more consumption of resources, especially physical and social infrastructure). There is limited research in New Zealand about the balance of these effects. We agree with the Bank’s assessment that the demand impacts are currently larger than the supply effects, at least in the short run. We welcome the Bank’s intention of commissioning more work to better understand the balance of effects.

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