As part of the new macroeconomic modelling project at the Reserve Bank of New Zealand, considerable effort has been directed towards constructing an historical estimate of the productive capacity of the New Zealand economy. The technique documented in this paper augments the stochastic-trend...

The recent productivity experience of the New Zealand economy is examined using a cyclically-adjusted or trend measure of Total Factor Productivity (TFP). On the basis of this measure, the results of estimating a leader-follower convergence relationship suggest that productivity in New Zealand...

This paper outlines how the Reserve Bank of New Zealand's Forecasting and Policy System (FPS) is used to prepare the quarterly economic projections. In addition to a very brief overview of the system, the paper focuses on four key issues. First, the current methodology for incorporating a...

In this paper, stochastic simulations of the Reserve Bank of New Zealand's new macroeconomic model, FPS, are used to examine the issue of which price index monetary policy should stabilise in a small open economy. Under the class of policy rules considered, targeting a measure of domestic...

Monetary policy authorities can adjust their instrument at any point in time to achieve their policy objective. In some countries, such as the United States and the United Kingdom, policymakers choose to usually make adjustments only after a formal medium-term inflation forecast. Other...

Uncertainty in applied macroeconomic policy analysis arises from three distinct sources. The first, often referred to as model uncertainty, arises because the models used for policy analysis are simple abstractions of the complex behavioural interactions that occur in an economy. The second...