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Price Effects of Monetary Policy: The Case of a Small Open Economy of New Zealand

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Author Info

  • Shahnawaz Karim

    ()
    (National Center for Financial and Economic Information (NCFEI), Ministry of Finance, Riyadh-11177, Kingdom of Saudi Arabia)

  • Minsoo Lee

    ()
    (Economics and Research Department, Asian Development Bank, Postal: P.O. Box 789, Manila)

  • Christopher Gan

    ()
    (Commerce Division, PO Box 84, Lincoln University, Lincoln 7647, Canterbury, New Zealand)

Abstract

This 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 Info

Article 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)
Pages: 253-272

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Handle: RePEc:eap:articl:v:41:y:2011:i:3:p:253-272

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Web page: http://www.journals.elsevier.com/economic-analysis-and-policy/
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Related research

Keywords: New Open Economy Macroeconomic model; Monetary transmission mechanism; Inflation targeting monetary policy; Exchange rate pass-through;

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  1. Marta-Pedroso, Cristina & Freitas, Helena & Domingos, Tiago, 2007. "Testing for the survey mode effect on contingent valuation data quality: A case study of web based versus in-person interviews," Ecological Economics, Elsevier, vol. 62(3-4), pages 388-398, May.
  2. Boxall, Peter & Adamowicz, W.L. & Moon, Amanda, 2009. "Complexity in choice experiments: choice of the status quo alternative and implications for welfare measurement," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(4), December.
  3. Roger H. von Haefen & D. Matthew Massey & Wiktor L. Adamowicz, 2005. "Serial Nonparticipation in Repeated Discrete Choice Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1061-1076.
  4. Nielsen, Jytte Seested, 2011. "Use of the Internet for willingness-to-pay surveys: A comparison of face-to-face and web-based interviews," Resource and Energy Economics, Elsevier, vol. 33(1), pages 119-129, January.
  5. Peter Boxall & W. L. (Vic) Adamowicz & Amanda Moon, 2009. "Complexity in choice experiments: choice of the status quo alternative and implications for welfare measurement ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(4), pages 503-519, October.
  6. Søren Olsen, 2009. "Choosing Between Internet and Mail Survey Modes for Choice Experiment Surveys Considering Non-Market Goods," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(4), pages 591-610, December.
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