Over the last few years, monetary policy in New Zealand has focused on reducing strong demand and inationary pressures. It has been commented that this task has been frustrated by a weakening of the monetary policy transmission mechanism in New Zealand. In this paper we draw upon a range of...

In the first of two articles on the transmission mechanism of New Zealand monetary policy, we provide a detailed account of the process by which changes in the Reserve Bank’s primary monetary policy instrument, the Official Cash Rate (OCR), eventually come to influence the general level of...

The Reserve Bank of New Zealand (RBNZ) is regarded as one of the most transparent central banks in the world. Recent research suggests that one benefit of such transparency is that financial markets better anticipate a central bank's reaction to incoming data, and in relation, do not over-react...

Real Business Cycle (RBC) and Dynamic Stochastic General Equilibrium (DSGE) methods have become essential components of the macroeconomist’s toolkit. This literature review stresses recently developed (often Bayesian) techniques for computation and inference, providing a supplement to the...

Real Business Cycle (RBC) and Dynamic Stochastic General Equilibrium (DSGE) methods have become essential components of the macroeconomist’s toolkit. This literature review stresses recently developed techniques for computation and inference, providing a supplement to the Romer (2006)...

Real business cycle (RBC) and dynamic stochastic general equilibrium (DSGE) methods have become essential components of the macroeconomist's toolkit. This literature review stresses recently developed techniques for computation and inference, providing a supplement to the Romer textbook, which...

This paper tests the present value model of the current account on New Zealand data. There is some evidence in favour of the PVM – the current account tests as stationary and Granger-causes changes in national net income. However, the cross-equation restrictions implied by the model are...

In this paper we use a small open economy model to identify the causal factors that drive New Zealand's current account. The model features nonseparable preferences, habit in consumption, imperfect capital mobility, permanent productivity shocks, fiscal shocks and two foreign shocks to explore...

This is the second of two Bulletin articles on the transmission mechanism of New Zealand monetary policy. In the first article (Drew and Sethi 2007), we described this mechanism, detailing the process by which changes in the Reserve Bank’s primary monetary policy instrument, the Official Cash...

Computing the optimal trajectory over time of key variables is a standard exercise in decision-making and the analysis of many dynamic systems. In practice however, it is often enough to ensure that these variables evolve within certain bounds. In this paper we study the problem of setting...