New Zealand's terms of trade have risen by 30 per cent in the last decade, raising national income by about 9 per cent. This note explores some of the economic consequences of the higher terms of trade.

The Balassa-Samuelson hypothesis suggests that countries with a weak relative productivity performance should, over time, see a low or falling real exchange rate. This note uses detailed sectoral data to test the hypothesis over the period 1978-2006 and also fails to find any evidence of the...

Some simple cross-country comparisons of exchange rate volatility are presented, suggesting that New Zealand's exchange rate has been more volatile than those of many of its peers. The note also discusses possible reasons for the volatility, and possible policy responses

The exchange rate matters a lot in New Zealand and the Reserve Bank uses several different models, each imprecise, to analyse it. This note focuses on just one of those approaches: the macro-balance model of the exchange rate. We use that model to estimate the exchange rate which, if sustained,...