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What drives the New Zealand dollar?

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  • Anella Munro

    (Reserve Bank of New Zealand)

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    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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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange rate pass-through into import prices: a macro or micro phenomenon?," Staff Reports 149, Federal Reserve Bank of New York.
    2. Ken West, 2003. "Monetary policy and the volatility of real exchange rates in New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2003/09, Reserve Bank of New Zealand.
    3. Obstfeld, Maurice & Shambaugh, Jay C. & Taylor, Alan M., 2004. "The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility," Center for International and Development Economics Research, Working Paper Series qt4rq9v2rb, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    4. Allsop, Christopher & Vines, David, 2000. "The Assessment: Macroeconomic Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 1-32, Winter.
    5. Charles Engel & James Morley, 2000. "The Adjustment of Prices and the Adjustment of the Exchange Rate," Working Papers 0009, University of Washington, Department of Economics.
    6. 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.
    7. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
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    Cited by:
    1. 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.
    2. 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).
    3. 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.

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