This paper utilises the partial adjustment approach of Judd and Rudebusch (1998) to empirically estimate the degree of short-term interest rate smoothing by central banks in the dollar block countries. All countries appear to smooth short-term interest rates significantly, with New Zealand and...

The New Zealand Treasury and the Reserve Bank of New Zealand both maintain and use comprehensive macroeconomic models of the New Zealand economy: NZM and FPS respectively. In this paper, shocks are applied to the two models to illustrate and compare their dynamic properties. The most notable...

Uncertainty in applied macroeconomic policy analysis arises from three distinct sources. The first, often referred to as model uncertainty, arises because the models used for policy analysis are simple abstractions of the complex behavioural interactions that occur in an economy. The second...

This paper outlines how the Reserve Bank of New Zealand's Forecasting and Policy System (FPS) is used to prepare the quarterly economic projections. In addition to a very brief overview of the system, the paper focuses on four key issues. First, the current methodology for incorporating a...

In this paper, stochastic simulations of the Reserve Bank of New Zealand's new macroeconomic model, FPS, are used to examine the issue of which price index monetary policy should stabilise in a small open economy. Under the class of policy rules considered, targeting a measure of domestic...

Simple rules for guiding monetary policy actions have been shown to achieve policy objectives effectively. In many of these simple rules, policy prescriptions depend on the economy's level of potential output. However, potential output is unobservable and is estimated with uncertainty. We...