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...

New Zealand and Australia have recently had large import price increases on the back of currency depreciations. Despite these large import price shocks, consumer prices have not risen as strongly as would be suggested by previously accepted relationships. The recent prolonged period of general...