We estimate underlying macroeconomic policy objectives of three of the earliest explicit inflation targeters - Australia, Canada and New Zealand - within the context of a small open economy DSGE model. We assume central banks set policy optimally, such that we can reverse engineer policy...

This paper examines stabilisation bias - the difference between the inferior macroeconomic outcomes attained with discretionary monetary policy relative to the ideal that could be attained with commitment policy. The paper works within the linear-quadratic framework and represents the monetary...

This paper quantifies the costs of mitigating exchange rate volatility within the context of a flexible inflation targeting central bank. Within a standard linearquadratic formulation of inflation targeting, we append a term that penalises deviations in the exchange rate to the central bank’s...

Typical New Keynesian open economy models suggest a limited response to the exchange rate. This paper examines the role of the open economy in determining robust rules when the central bank fears various model misspecification errors. The paper calibrates a hybrid New Keynesian model to broadly...

This paper tests the standard quadratic approximation to central bank preferences on data from Australia and New Zealand, two of the earliest explicit inflation targeting countries. The standard linear-quadratic monetary policy model assumes central bank preferences over key macroeconomic...

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...

In December 2008, jointly with the Bank for International Settlements, the Reserve Bank hosted a workshop entitled “Nowcasting with Model Combination”. This workshop was an opportunity for central bank practitioners and local and offshore academics to discuss recent technical advances in how...

Auckland is on the move. Economic growth is outpacing most regions and people continue to flow into the city. This is putting pressure on the shape of Auckland city and the form of housing and transport infrastructure.

This working paper evidences the key trends that should be expected to result from an ageing population. It looks at which kinds of industries will fall and which will flourish. It discusses the kinds of trends we might expect in terms of consumer demand and it touches on what firms should be...

A new report from the New Zealand Institute of Economic Research (NZIER) highlights the unprecedented fiscal challenges that New Zealand politicians will face in coming decades. NZIER recommends that tough decisions around taxes and government spending need to be taken now, and stuck to, in...