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Exchange rate strategies for small open developed economies such as New Zealand

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  • Nils Bjorksten
  • Anne-Marie Brook

    (Reserve Bank of New Zealand)

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    Abstract

    Changes in the global financial system, together with new experience with fixed and floating exchange rates, have resulted in a reassessment of exchange rate strategies for both developed and emerging market economies. The emergence of a currency union in Europe has been seen by some as showing the path forward in the continuing integration process of developed nations, including New Zealand. In view of the large swings in the New Zealand exchange rate over the past decade, some attention has recently been paid to alternative exchange rate strategies that might allow for reductions in exchange rate variability, and potentially better economic growth performance. This article discusses these issues. It is an edited version of a paper presented by the Reserve Bank to an economic workshop on Exchange Rate Strategies for Developed Open Economies in the New Millennium, held in February 2002. Papers presented at this workshop are available at: http://www.rbnz.govt.nz/research/workshops/111791/0111791-02.html#P99_2657

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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): 65 (2002)
    Issue (Month): (March)
    Pages:

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    Handle: RePEc:nzb:nzbbul:march2002:2

    Note: Papers presented at this workshop are available at: http://www.rbnz.govt.nz/research/workshops/111791/0111791-02.html#P99_2657
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    1. David Hargreaves & Andy Brookes & Carrick Lucas & Bruce White, 2000. "Can hedging insulate firms from exchange rate risk," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, March.
    2. Francisco Gallego & Leonardo Hernández & Klaus Schmidt-Hebbel, 1999. "Capital Controls in Chile: Effective? Efficient?," Working Papers Central Bank of Chile 59, Central Bank of Chile.
    3. Michael Reddell & Ian Woolford & Sean Comber, 2001. "International capital flows, external debt, and New Zealand financial stability," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, December.
    4. Andrew Coleman, 1999. "Economic Integration and Monetary Union," Treasury Working Paper Series 99/06, New Zealand Treasury.
    5. Y.Chen & K. Rogoff, 2003. "Commodity Currencies and Empirical Exchange Rate Puzzles," DNB Staff Reports (discontinued) 76, Netherlands Central Bank.
    6. Dr Don Brash, 2000. "The pros and cons of currency union: a Reserve Bank perspective," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, June.
    7. Rose, Andrew K, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," CEPR Discussion Papers 2329, C.E.P.R. Discussion Papers.
    8. Tim Hampton, 2001. "How much do import price shocks matter for consumer prices?," Reserve Bank of New Zealand Discussion Paper Series DP2001/06, Reserve Bank of New Zealand.
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    10. Nils Bjorksten, 2001. "The current state of New Zealand monetary union research," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, December.
    11. Anne-Marie Brook & David Hargreaves, 2001. "PPP-based analysis of New Zealand's equilibrium exchange rate," Reserve Bank of New Zealand Discussion Paper Series DP2001/01, Reserve Bank of New Zealand.
    12. Eichengreen, Barry, 2002. "When to Dollarize," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 1-24, February.
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    14. Frankel, Jeffrey A. & Rose, Andrew K., 1995. "Empirical research on nominal exchange rates," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 33, pages 1689-1729 Elsevier.
    15. Sarno, Lucio & Taylor, Mark P, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?," CEPR Discussion Papers 2690, C.E.P.R. Discussion Papers.
    16. Joseph Stiglitz, 2001. "Monetary and exchange rate policy in small open economies: the case of Iceland," Economics wp15_stiglitz, Department of Economics, Central bank of Iceland.
    17. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    18. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    19. Willem H. Buiter, 2000. "Is Iceland an Optimal Currency Area?," Economics wp10, Department of Economics, Central bank of Iceland.
    20. Dr Donald Brash, 1999. "The New Zealand dollar and the recent business cycle," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
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    Cited by:
    1. corrinne ho & robert n mccauley, 2004. "Living with flexible exchange rates:," International Finance 0411003, EconWPA.

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