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WOULD ADOPTING THE US DOLLAR HAVE LED TO IMPROVED INFLATION, OUTPUT AND TRADE BALANCES FOR NEW ZEALAND IN THE 1990s?

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  • Viv Hall
  • Angela Huang

Abstract

Deterministic simulations with the Reserve Bank of New Zealand’s core FPS model show how New Zealand’s broad macroeconomic environment might have evolved over the 1990s, if a US nominal yield curve and US TWI exchange rate movements under a common currency arrangement had been experienced.Relatively looser monetary conditions would have prevailed, and led to modest short-run output gains, greater excess demand pressures, noticeably higher CPI inflation rates over the whole of the 1990s, and less favourable trade balance outcomes, especially for the late 1990s.These macroeconomic outcomes are overall less favourable than those obtained from simulating the equivalent Australian monetary conditions.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0401001.

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Date of creation: 08 Jan 2004
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Handle: RePEc:wpa:wuwpma:0401001

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Web page: http://128.118.178.162

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Keywords: Common currency; monetary policy; deterministic simulation; New Zealand; Australia; United States.;

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  1. David Hargreaves & C John McDermott, 1999. "Issues relating to optimal currency areas: theory and implications for New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, September.
  2. Drew, Aaron & Hall, Viv B. & McDermott, C. John & Clair, Robert St., 2004. "Would adopting the Australian dollar provide superior monetary policy in New Zealand?," Economic Modelling, Elsevier, vol. 21(6), pages 949-964, December.
  3. Viv Hall & Kunhong Kim & Robert Buckle, 1998. "Pacific rim business cycle analysis: Synchronisation and volatility," New Zealand Economic Papers, Taylor and Francis Journals, vol. 32(2), pages 129-159.
  4. Hunt, Benjamin & Rose, David & Scott, Alasdair, 2000. "The core model of the Reserve Bank of New Zealand's Forecasting and Policy System," Economic Modelling, Elsevier, vol. 17(2), pages 247-274, April.
  5. 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.
  6. Sharon McCaw & C John McDermott, 2000. "How New Zealand adjusts to macroeconomic shocks: implications for joining a currency area," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, March.
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Cited by:
  1. Arthur Grimes, 2005. "Regional and Industry Cycles in Australasia: Implications for a Common Currency," Working Papers 05_04, Motu Economic and Public Policy Research.
  2. David C Maré, 2005. "Indirect Effects of Active Labour Market Policies," HEW 0509004, EconWPA.
  3. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
  4. Drew, Aaron & Hall, Viv B. & McDermott, C. John & Clair, Robert St., 2004. "Would adopting the Australian dollar provide superior monetary policy in New Zealand?," Economic Modelling, Elsevier, vol. 21(6), pages 949-964, December.
  5. David C. Maré & Michelle Poland, 2005. "Defining Geographic Communities," Working Papers 05_09, Motu Economic and Public Policy Research.
  6. Viv B. Hall, 2005. "An Australasian Currency, New Zealand Adopting The Us Dollar, Or An Independent Monetary Policy?," CAMA Working Papers 2005-22, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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