When nominal interest rates are near their zero lower bound (ZLB), as in many developed economies at the time of writing, it is theoretically untenable to apply the popular class of Gaussian affine term structure models (GATSMs) given their inherent material probabilities of negative interest...

With nominal interest rates near the zero lower bound (ZLB) in many major economies, it is theoretically untenable to apply Gaussian affine term structure models (GATSMs) while ignoring their inherent material probabilities of negative interest rates. I propose correcting that deficiency by...

I propose a simple framework that quantities the stance of monetary policy as a "shadow short rate" when interest rates are near the zero lower bound. The framework is shown to be a close approximation to the Black (1995) framework for modelling the term structure subject to a zero-lower-bound...

What are the odds of a large shift in the exchange rate? Is a large depreciation more likely than a large appreciation? This paper uses over-the-counter New Zealand dollar/US dollar option prices to quantify market expectations of exchange rate uncertainty through measures based on risk-neutral...

Forecasting the future path of the economy is essential for good monetary policy decisions. The recent financial crisis has highlighted the importance of tail events, and that assessing the central projection is not enough. The whole range of outcomes should be forecasted, evaluated and...

The ability of financial frictions to amplify the output response of monetary policy, as in the financial accelerator model of Bernanke et al (1999), is analysed for a wider class of policy rules where the policy interest rate responds to both inflation and the output gap. When policy makers...

The Reserve Bank of New Zealand was the first central bank to publish interest rate projections as a tool for forward guidance of monetary policy. This paper provides new evidence on the information content of interest rate projections for market expectations about future short-term rates before...

This paper uses multiple criteria decision making, also termed conjoint analysis,to reveal the preferences of central bank policy-makers at the Reserve Bank of New Zealand. Guided by the Policy Targets Agreement between the Governor of the Reserve Bank and the Minister of Finance, we identify...

This paper uses wavelets to develop a core inflation measure for inflation targeting central banks. The analysis is applied to the case of New Zealand – the country with the longest history of explicit inflation targeting. We compare the performance of our proposed measure against some popular...

The merits of a trans-Tasman currency union have been debated in both New Zealand and Australia. It has been suggested that the New Zealand economy may not behave too differently from at least some of the Australian states, ie they have similar characteristics and they face similar shocks. We...