IDEAS home Printed from https://ideas.repec.org/p/nzb/nzbans/2016-05.html
   My bibliography  Save this paper

The Impact of Commodity Price Movements on the New Zealand Economy

Author

Listed:

Abstract

We estimate the macroeconomic effects of changes in commodity prices on the New Zealand economy. Our analysis suggests that an increase in commodity prices has similar characteristics to demand driven macroeconomic fluctuations. GDP expenditure subcomponents such as consumption and investment tend to rise in response to higher commodity prices. Business investment appears to respond more than consumption, highlighting its importance in the transmission of a commodity price movements. In line with higher demand pressures, non-tradable inflation is estimated to increase persistently. We find that the real exchange rate appreciates, and tradable inflation decreases accordingly. Possibly due to the divergent patterns of tradable and non-tradable inflation, the interest rate does not respond to higher commodity prices in the very short-run but is estimated to increase over longer horizons.

Suggested Citation

  • Günes Kamber & Gabriela Nodari & Benjamin Wong, 2016. "The Impact of Commodity Price Movements on the New Zealand Economy," Reserve Bank of New Zealand Analytical Notes series AN2016/05, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbans:2016/05
    as

    Download full text from publisher

    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Analytical%20notes/2016/an2016-05.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Miles Parker & Benjamin Wong, 2014. "Exchange rate and commodity price pass‐through in New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2014/01, Reserve Bank of New Zealand.
    2. Lutz Kilian, 2008. "The Economic Effects of Energy Price Shocks," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 871-909, December.
    3. Chen, Yu-chin & Rogoff, Kenneth, 2003. "Commodity currencies," Journal of International Economics, Elsevier, vol. 60(1), pages 133-160, May.
    4. Osborn, Denise R. & Vehbi, Tugrul, 2015. "Growth in China and the US: Effects on a small commodity exporter economy," Economic Modelling, Elsevier, vol. 45(C), pages 268-277.
    5. West, Kenneth D. & Wong, Ka-Fu, 2014. "A factor model for co-movements of commodity prices," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 289-309.
    6. Alfred A. Haug & Christie Smith, 2012. "Local Linear Impulse Responses for a Small Open Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(3), pages 470-492, June.
    7. Hilde C. Bjørnland & Leif A. Thorsrud, 2016. "Boom or Gloom? Examining the Dutch Disease in Two‐speed Economies," Economic Journal, Royal Economic Society, vol. 126(598), pages 2219-2256, December.
    8. Güneş Kamber & Chris McDonald & Gael Price, 2013. "Drying out: Investigating the economic effects of drought in New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2013/02, Reserve Bank of New Zealand.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pinshi, Christian P., 2018. "Les effets macroéconomiques de la chute des cours des produits de base: Evaluation sur la République démocratique du Congo [The Macroeconomic Effects of commodity bust: Assessment on Democratic Rep," MPRA Paper 93130, University Library of Munich, Germany, revised 0208.
    2. Rebecca Williams, 2017. "Business cycle review: 2008 to present day," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 80, pages 1-22, March.
    3. Neroli Austin & Geordie Reid, 2017. "NZSIM: A model of the New Zealand economy for forecasting and policy analysis," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 80, pages 1-14, January.
    4. Michael Callaghan & Enzo Cassino & Tugrul Vehbi & Benjamin Wong, 2019. "Opening the toolbox: how does the Reserve Bank analyse the world?," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 82, pages 1-14, April.
    5. Junior A. Ojeda Cunya & Gabriel Rodríguez, 2022. "Time-Varying Effects of External Shocks on Macroeconomic Fluctuations in Peru: An Empirical Application using TVP-VAR- SV Models," Documentos de Trabajo / Working Papers 2022-507, Departamento de Economía - Pontificia Universidad Católica del Perú.
    6. PINSHI, Christian P., 2018. "Macroeconomic effects of falling commodity price: Evidence from Democratic Republic of the Congo," MPRA Paper 101068, University Library of Munich, Germany.
    7. Philip R Lane & Livio Stracca, 2018. "Can appreciation be expansionary? Evidence from the euro area," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(94), pages 225-264.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hansen, James & Gross, Isaac, 2018. "Commodity price volatility with endogenous natural resources," European Economic Review, Elsevier, vol. 101(C), pages 157-180.
    2. Basher, Syed Abul & Haug, Alfred A. & Sadorsky, Perry, 2012. "Oil prices, exchange rates and emerging stock markets," Energy Economics, Elsevier, vol. 34(1), pages 227-240.
    3. James Cust & Torfinn Harding & Pierre-Louis Vézina, 2019. "Dutch Disease Resistance: Evidence from Indonesian Firms," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(6), pages 1205-1237.
    4. Kamber, Gunes & McDonald, Chris & Sander, Nick & Theodoridis, Konstantinos, 2016. "Modelling the business cycle of a small open economy: The Reserve Bank of New Zealand's DSGE model," Economic Modelling, Elsevier, vol. 59(C), pages 546-569.
    5. Byrne, Joseph P. & Ibrahim, Boulis Maher & Sakemoto, Ryuta, 2019. "Carry trades and commodity risk factors," Journal of International Money and Finance, Elsevier, vol. 96(C), pages 121-129.
    6. Domenico Ferraro & Kenneth S. Rogoff & Barbara Rossi, 2011. "Can oil prices forecast exchange rates?," Working Papers 11-34, Federal Reserve Bank of Philadelphia.
    7. Yin, Libo & Ma, Xiyuan, 2018. "Causality between oil shocks and exchange rate: A Bayesian, graph-based VAR approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 508(C), pages 434-453.
    8. Eickmeier, Sandra & Ng, Tim, 2011. "Forecasting national activity using lots of international predictors: An application to New Zealand," International Journal of Forecasting, Elsevier, vol. 27(2), pages 496-511, April.
    9. Gnimassoun, Blaise & Joëts, Marc & Razafindrabe, Tovonony, 2017. "On the link between current account and oil price fluctuations in diversified economies: The case of Canada," International Economics, Elsevier, vol. 152(C), pages 63-78.
    10. Magali Dauvin, 2013. "Energy prices and the real exchange rate of commodity-exporting countries," EconomiX Working Papers 2013-33, University of Paris Nanterre, EconomiX.
    11. Michael Callaghan & Enzo Cassino & Tugrul Vehbi & Benjamin Wong, 2019. "Opening the toolbox: how does the Reserve Bank analyse the world?," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 82, pages 1-14, April.
    12. Zhang, Hui Jun & Dufour, Jean-Marie & Galbraith, John W., 2016. "Exchange rates and commodity prices: Measuring causality at multiple horizons," Journal of Empirical Finance, Elsevier, vol. 36(C), pages 100-120.
    13. Lance A. Fisher & Hyeon‐seung Huh & David Kim, 2020. "Growth Shocks in the United States and China: Effects on Australia's Growth," Economic Papers, The Economic Society of Australia, vol. 39(3), pages 185-203, September.
    14. Luis N. Lanteri, 2015. "Efectos de la enfermedad holandesa ('Dutch disease'). Alguna evidencia para Argentina," Revista de Economía del Rosario, Universidad del Rosario, vol. 18(2), pages 187-209, December.
    15. Samya Beidas-Strom & Marco Lorusso, 2019. "Macroeconomic Effects of Reforms on Three Diverse Oil Exporters: Russia, Saudi Arabia, and the UK," IMF Working Papers 2019/214, International Monetary Fund.
    16. Abiad, Abdul & Qureshi, Irfan A., 2023. "The macroeconomic effects of oil price uncertainty," Energy Economics, Elsevier, vol. 125(C).
    17. Kelly Burns & Imad Moosa, 2017. "Demystifying the Meese–Rogoff puzzle: structural breaks or measures of forecasting accuracy?," Applied Economics, Taylor & Francis Journals, vol. 49(48), pages 4897-4910, October.
    18. Huang, Shupei & An, Haizhong & Gao, Xiangyun & Sun, Xiaoqi, 2017. "Do oil price asymmetric effects on the stock market persist in multiple time horizons?," Applied Energy, Elsevier, vol. 185(P2), pages 1799-1808.
    19. Vincent Brémond & Emmanuel Hache & Tovonony Razafindrabe, 2016. "The Oil Price and Exchange Rate Relationship Revisited: A time-varying VAR parameter approach," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 13(1), pages 97-131, June.
    20. Theodosios Anastasios Perifanis, 2022. "The Macroeconomic Results of Diligent Resource Revenues Management: The Norwegian Case," Energies, MDPI, vol. 15(4), pages 1-14, February.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzb:nzbans:2016/05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Reserve Bank of New Zealand Knowledge Centre (email available below). General contact details of provider: https://edirc.repec.org/data/rbngvnz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.