Recursive-weight forecast combination is often found to an ineffective method of improving point forecast accuracy in the presence of uncertain instabilities. We examine the effectiveness of this strategy for forecast densities using (many) VARs and ARs of output, prices and interest rates. Our...

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 note illustrates the connections between the Hessians of numerical optimization problems, variance-covariance matrices for parameter vectors, and the influence that data mismeasurement may have on parameter estimates. Condition numbers provide a central guide to the sensitivity of common...

Gravity models have been shown to be fairly effective in modelling bilateral trading patterns, explaining more than 50 per cent of the variation in trade. This paper examines bilateral trade patterns using a data set provided by Rose and van Wincoop (2001). Rose (2000) has suggested that forming...

Over the last few years, monetary policy in New Zealand has focused on reducing strong demand and inationary pressures. It has been commented that this task has been frustrated by a weakening of the monetary policy transmission mechanism in New Zealand. In this paper we draw upon a range of...

We evaluate the performance of an open economy DSGE-VAR model for New Zealand along both forecasting and policy dimensions. We show that forecasts from a DSGE-VAR and a 'vanilla' DSGE model are competitive with, and in some dimensions superior to, the Reserve Bank of New Zealand's official...

Real Business Cycle (RBC) and Dynamic Stochastic General Equilibrium (DSGE) methods have become essential components of the macroeconomist’s toolkit. This literature review stresses recently developed (often Bayesian) techniques for computation and inference, providing a supplement to the...

Traditional vector autoregressions derive impulse responses using iterative techniques that may compound specification errors. Local projection techniques are robust to this problem, and Monte Carlo evidence suggests they provide reliable estimates of the true impulse responses. We use local...

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...

We forecast economic growth in New Zealand using yield curve data within simple statistical models; i.e. typical OLS relationships that have been well-established for other countries, and related VAR specifcations. We find that the yield curve data has significant forecasting power in absolute...