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Stabilization bias for a small open economy: The case of New Zealand

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  • Liu, Philip

Abstract

Using a fully specified DSGE model, this paper investigates the relationship between a central bank's policy objectives and the stabilization bias. The model is estimated using data from New Zealand. Results indicate that the size of the stabilization bias is nearly twice as large for a small open economy relative to that of closed economies. The results also indicate that the size of the stabilization bias is increasing with respect to the policymaker's preference for exchange rate stabilization.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 3 (September)
Pages: 921-935

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:3:p:921-935

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Stabilization bias DSGE models Bayesian estimation Small open economy;

References

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Cited by:
  1. Li-gang Liu & Laurent Pauwels & Andrew Tsang, 2007. "How Large is the Wealth Effect on Hong Kong¡¦s Consumption? Evidence from a Habit Formation Model of Consumption," Working Papers 0720, Hong Kong Monetary Authority.

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