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What drives the New Zealand dollar?

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  • Anella Munro

    (Reserve Bank of New Zealand)

Abstract

This article draws together some of our recent exchange rate research. The research is interpreted against an asset price view of the exchange rate, which has become increasingly relevant as foreign exchange market turnover has become dominated by capital market transactions unrelated to trade in goods and services. Factors that affect expected relative returns on New Zealand dollar assets (eg interest rates, export commodity prices, fixed asset prices and a notion of equilibrium) are found to explain a considerable part of exchange rate cycles, even though they explain only a small part of short-term exchange rate fluctuations. The sources of the relative stability of the Australia-New Zealand bilateral exchange rate and the larger variation of the New Zealand-United States bilateral exchange rate are explored.

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File URL: http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2004/2004june67_2munro.pdf
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Bibliographic Info

Article provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.

Volume (Year): 67 (2004)
Issue (Month): (june)
Pages:

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Handle: RePEc:nzb:nzbbul:june2004:3

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  1. Allsop, Christopher & Vines, David, 2000. "The Assessment: Macroeconomic Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 1-32, Winter.
  2. Charles Engel & James Morley, 2000. "The Adjustment of Prices and the Adjustment of the Exchange Rate," Discussion Papers in Economics at the University of Washington 0009, Department of Economics at the University of Washington.
  3. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc.
  4. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2004. "The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility," NBER Working Papers 10396, National Bureau of Economic Research, Inc.
  5. Kenneth D. West, 2004. "Monetary Policy and the Volatility of Real Exchange Rates in New Zealand," NBER Working Papers 10280, National Bureau of Economic Research, Inc.
  6. Campa, José Manuel & Goldberg, Linda S, 2004. "Exchange Rate Pass-Through into Import Prices," CEPR Discussion Papers 4391, C.E.P.R. Discussion Papers.
  7. David Hargreaves, 2003. "Monetary policy and the volatility of real exchange rates in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 66, pages 2, September.
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Cited by:
  1. Angela Huang, 2004. "Examining finite-sample problems in the application of cointegration tests for long-run bilateral exchange rates," Reserve Bank of New Zealand Discussion Paper Series DP 2004/08, Reserve Bank of New Zealand.
  2. Chris McDonald, 2012. "Kiwi drivers the New Zealand dollar experience," Reserve Bank of New Zealand Analytical Notes series AN2012/02, Reserve Bank of New Zealand.
  3. Hsing, Yu, 2009. "Analysis of the Behavior of the New Zealand Dollar Exchange Rate: Comparison of Four Major Models," Review of Applied Economics, Review of Applied Economics, vol. 5(1-2).
  4. Kelly Eckhold & Chris Hunt, 2005. "The Reserve Bank of New Zealand’s new foreign exchange intervention policy," BIS Papers chapters, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 231-41 Bank for International Settlements.
  5. Willy Chetwin & Tim Ng & Daan Steenkamp, 2013. "New Zealand’s short- and medium-term real exchange rate volatility: drivers and policy implications," Reserve Bank of New Zealand Analytical Notes series AN2013/03, Reserve Bank of New Zealand.
  6. Phil Briggs & Carly Harker & Tim Ng & Aidan Yao, 2011. "Fluctuations in the international prices of oil, dairy products, beef and lamb between 2000 and 2008: A review of market-specific demand and supply factors," Reserve Bank of New Zealand Discussion Paper Series DP2011/02, Reserve Bank of New Zealand.

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