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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. 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.
  2. 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.
  3. 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.
  4. Andrew Coleman, 1999. "Economic Integration and Monetary Union," Treasury Working Paper Series 99/06, New Zealand Treasury.
  5. Andrew Coleman, 2001. "Three Perspectives on an Australasian Monetary Union," RBA Annual Conference Volume, in: David Gruen & John Simon (ed.), Future Directions for Monetary Policies in East Asia Reserve Bank of Australia.
  6. 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.
  7. Aaron Drew & Viv Hall & John McDermott & Robert St. Clair, 2001. "Would adopting the Australian dollar provide superior monetary policy in New Zealand?," Reserve Bank of New Zealand Discussion Paper Series DP2001/03, Reserve Bank of New Zealand.
  8. Viv Hall & Kunhong Kim & Robert Buckle, 1998. "Pacific rim business cycle analysis: Synchronisation and volatility," New Zealand Economic Papers, Taylor & Francis Journals, vol. 32(2), pages 129-159.
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Cited by:
  1. 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.
  2. Arthur Grimes, 2005. "Regional and Industry Cycles in Australasia: Implications for a Common Currency," Macroeconomics 0509020, EconWPA.
  3. David C Maré, 2005. "Indirect Effects of Active Labour Market Policies," HEW 0509004, EconWPA.
  4. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
  5. David C. Maré & Michelle Poland, 2005. "Defining Geographic Communities," Working Papers 05_09, Motu Economic and Public Policy Research.
  6. 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.

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