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

Connections between short-term fluctuations in one country's economic activity and those in the rest of world received renewed focus after the 2008/09 recession. This paper examines some of those connections using several statistical techniques.

Over the past several decades, China’s share of global output and trade – and of trade with New Zealand – has increased rapidly. This note outlines some of the ways in which the emergence of China has influenced, and may influence in the future, New Zealand’s economy.

Fluctuations in the margins banks paid (over risk-free interest rates) on their funding costs have been a significant factor since the financial crisis of 2008/09. This paper uses a model to analyse the response of New Zealand’s monetary policy to such fluctuations since 1993, On average, the...

ntral clearing of derivatives contracts is one way to reduce risk in the financial system. Since the crisis of 2008/09 there has been an international push to clear more derivatives contracts through central counterparties. This paper reviews some of the considerations facing small advanced...

Estimates of the "output gap" play a significant role in the thinking of inflation- targeting central banks. This note outlines how the Reserve Bank estimates the level of potential output and the output gap.facing small advanced economies, such as New Zealand.

Using data from the Household Economic Survey we examine the vulnerability of several cohorts of owner-occupiers who had recently taken out mortgages. We focus particularly on the period leading up to the introduction of the "speed limit" on high LVR mortgage lending.

Exchange rate changes affect prices in New Zealand. Using data from the last 25 years, this note illustrates how the inflation responses have differed depending on what caused the exchange rate to move.