The New Zealand dollar through the global financial crisis
AbstractIn this article, we examine the impact of the global financial crisis on the New Zealand dollar (NZD). The NZD fell, on a trade-weighted basis, by 35 percent over the period from 2007 to early 2009 during the peak of the crisis, and remains around 10-12 percent below its pre-crisis peak. The impact of the carry trade on the value of the NZD appears to have diminished, as international investors shifted their attention to higher-yielding currencies, such as the Australian dollar and the Brazilian real. There have also been several periods of market turbulence during the crisis, during which movements in the exchange rate have been driven primarily by declines in the risk appetite of international investors. These developments are consistent with the decline in liquidity in the NZD currency market compared to pre-crisis levels. Our regime-switching model of the NZD/US dollar (USD) exchange rate identifies several instances during the past three years when the key exchange rate driver has changed from relative interest rates to investors’ risk appetite.
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Bibliographic InfoArticle provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.
Volume (Year): 73 (2010)
Issue (Month): (September)
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- D10 - Microeconomics - - Household Behavior - - - General
- R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
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.:
- Marion Kohler, 2010. "Exchange rates during financial crises," BIS Quarterly Review, Bank for International Settlements, March.
- Brooks,Chris, 2008. "Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9780521694681, December.
- 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.
- 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.
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