Many critics of the Taylor rule claim that it is inferior to inflation forecast based (IFB) rules because it is not forward-looking, is not aggressive enough, and because of uncertainty surrounding the output gap. Nevertheless, the Taylor rule serves a constructive purpose because it abstracts...

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...

Fundamental economic factors—market demand and supply conditions—provide the most consistent explanation for trends in commodity prices from 2004 to 2011. This paper presents empirical evidence that the rise and fall of commodity prices on a monthly basis can be strongly linked to the value...

In December 2000, the Reserve Bank issued a discussion paper entitled "Interest rate smoothing in New Zealand and other dollar bloc countries," written by Aaron Drew and L Christopher Plantier. The key points made are summarised in this paper.

We estimate a Factor Augmented Vector autoregression (FAVAR) to identify idiosyncratic exchange rate shocks and examine the effects of these shocks on different sectors of the economy. We find that an unexpected shock to the exchange rate has significant effects on the tradable sector of the...

Transmission mechanisms are the channels through which monetary policy affects macroeconomic variables, such as GDP and inflation. Differences in transmission mechanisms can generate asymmetric behaviour among currency union partners when they experience shocks. This has the potential to widen...

This article sets out theoretical and empirical evidence on the impact of fiscal policy on the business cycle. Our analysis suggests that fiscal policy has a significant influence on cyclical conditions in New Zealand. Simple measures of the stance of fiscal policy, such as the Treasury’s...

This article is an edited version of a paper written for the Centre of Central Banking Studies' Chief Economists Workshop in London in May 2006. The article reviews the evolution of modelling at the Reserve Bank of New Zealand from the 1970s to today, focusing on the changing role of inflation...