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Impacts of Monetary Policy Shocks on Inflation and Output in New Zealand

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  • Robert Kirkby
  • Huong Ngoc Vu

Abstract

We identify monetary policy shocks in New Zealand as 1‐day changes in the whole yield curve around monetary policy announcements. The impacts of these shocks on inflation and output are estimated using functional local projections. We find that the effects of monetary policy shocks are standard in the short run but might be different in the long run. Monetary policy shocks in a small open economy have similar effects as in a large economy, except that unconventional monetary policy announcements have limited impact on long‐term interest rates. Accounting for forward guidance, used in New Zealand since 1997, is important.

Suggested Citation

  • Robert Kirkby & Huong Ngoc Vu, 2024. "Impacts of Monetary Policy Shocks on Inflation and Output in New Zealand," The Economic Record, The Economic Society of Australia, vol. 100(329), pages 160-187, June.
    • Handle: RePEc:bla:ecorec:v:100:y:2024:i:329:p:160-187
    DOI: 10.1111/1475-4932.12792
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    References listed on IDEAS

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