Price Effects of Monetary Policy: The Case of a Small Open Economy of New Zealand
AbstractThis paper empirically examines the price effects of monetary policy shocks in New Zealand. Empirical analysis incorporates variables suggested by a hybrid New Open Economy Macroeconomic (NOEM) model, allowing both ‘producer and local currency pricing to market (PCP and LCP-PTM)’ activities of foreign exporters. Empirical findings indicate the absence of any price puzzle and show that New Zealand producer price index (PPI) responds more sluggishly than consumer price index (CPI) due to a restrictive domestic monetary stance; suggesting the differences between the exchange rate pass-through of monetary policy shocks to CPI and PPI resulting from exporters’ different pricing strategies.
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Bibliographic InfoArticle provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 41 (2011)
Issue (Month): 3 (December)
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Web page: http://www.journals.elsevier.com/economic-analysis-and-policy/
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New Open Economy Macroeconomic model; Monetary transmission mechanism; Inflation targeting monetary policy; Exchange rate pass-through;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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