We estimate the fair value of the New Zealand dollar using the macroeconomic balance approach. The model's elasticities are calibrated so that they are more appropriate to a small commodity-exporting economy. Over the 1990s, the model estimates that the fair value for the TWI fluctuated between...

We identify the timing of currency, banking crises and sudden stops in New Zealand from 1880 to 2008 using methodologies from the international literature and consider the extent to which the empirical models in that literature can explain New Zealand’s crisis history. We find that the cross...

The Forecasting and Policy System model (FPS) has been a very useful tool for forecasting and communication at the Reserve Bank of New Zealand. In part, its success has been due to pragmatic use, and the evolution of the model to reflect changing views of the New Zealand economy. However, as...

This paper documents the Reserve Bank of New Zealand's current approach to dealing with structural change, an important feature of New Zealand's recent macroeconomic history after the profound economic reforms undergone in the past twenty years. Traditional estimated macroeconomic models of New...

This paper describes the development of SDS-FPS, which is a small demand-side model calibrated to match some of the dynamic properties of the Reserve Bank's Forecasting and Policy System (FPS) core model. SDS-FPS is capable of matching the dynamic properties of FPS for a wide range of...

This paper characterises the relationship between wealth and consumption in New Zealand. We find that there exists a long-run cointegration relation between household consumption, income, housing wealth and net financial wealth. Permanent shocks account for most of the variation in wealth. This...

We use the Reserve Bank of New Zealand's macroeconomic model (FPS) to look at the feasibility of using monetary policy to reduce variability in output, the exchange rate and interest rates while maintaining an inflation target. Our experiment suggests that policy could be altered to increase the...

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...

According to theory, higher expected foreign risk-free returns and foreign currency risk both increase foreign yields, but have opposing effects on the value of the foreign currency. This paper exploits that relationship to jointly identify the unobserved risk-free return and risk premium...

This paper analyzes the transmission mechanism of banking sector shocks in an international real business cycle model with heterogeneous bank sizes. We examine to what extent the financial exposure of the banking sector affects the transmission of foreign banking sector shocks. In our model, the...