Macroeconomics shock adjustment to small open economies : a structural VAR model of the New Zealand economy

This research builds a vector Autoregression model of the New Zealand economy and then analyses its dynamic responses to a number of shocks originating from both internal and external sources. In particular, impulse responses from a foreign output shock, terms of trade shock, shocks to domestic interest rates, and the nominal exchange rate are examined, together with the timing of their effects. Although New Zealand has coped well during the recent global financial turmoil, vulnerability to external shocks will remain because of its reliance on commodity exports and high overseas debt. New Zealand ; Financial liberalisation ; VAR model