Monetary Policy Rules in Practice: Evidence from New Zealand.

We use the ten years of experience in inflation-targeting in New Zealand since 1989 to test whether monetary policy appears to conform to the simple rules that have been recommended for it in the literature. Of the inflation targeting central banks, the Reserve Bank of New Zealand has both the longest experience and probably the most clearly defined target and policy framework for achieving it. We show that while a Taylor rule with the standard parameters used in the US does indeed describe New Zealand monetary policy quite well, the Reserve Bank has focused rather more strongly on price stability, as required by its Policy Target Agreements.