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Global shocks, economic growth and financial crises: 120 years of New Zealand experience

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  • Bordo, Michael
  • Hargreaves, David
  • Kida, Mizuho

Abstract

We identify the timing of currency, banking crises and sudden stops in New Zealand from 1880 to 2008 using methodologies from the international literature and consider the extent to which the empirical models in that literature can explain New Zealand's crisis history. We find that the cross-country evidence on the determinants of crises fits New Zealand experience reasonably well. A number of the risk factors that correlate with crises internationally – such as domestic imbalances, external debt, and currency mismatches – were elevated for New Zealand when the country had more frequent crises and have improved in the recent (more stable) period. However, a time-series analysis of New Zealand growth over 120 years shows that global factors – such as the US growth rate and terms of trade – explain New Zealand growth fairly well, and that crisis-dummy variables do not have substantial additional explanatory power. This suggests that having sound institutions and policies may help avoid severe domestic crises, but will not be sufficient to avoid the domestic economic impact of the global business cycle.

Suggested Citation

  • Bordo, Michael & Hargreaves, David & Kida, Mizuho, 2011. "Global shocks, economic growth and financial crises: 120 years of New Zealand experience," Financial History Review, Cambridge University Press, vol. 18(3), pages 331-355, December.
  • Handle: RePEc:cup:fihrev:v:18:y:2011:i:03:p:331-355_00
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    5. Bordo, Michael D. & Cavallo, Alberto F. & Meissner, Christopher M., 2010. "Sudden stops: Determinants and output effects in the first era of globalization, 1880-1913," Journal of Development Economics, Elsevier, vol. 91(2), pages 227-241, March.
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    Cited by:

    1. Adrian Pagan & Don Harding, 2011. "Econometric Analysis and Prediction of Recurrent Events," CREATES Research Papers 2011-33, Department of Economics and Business Economics, Aarhus University.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Is the 2007 US Sub-Prime Financial Crisis So Different?: An International Historical Comparison," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 291-299.
    3. Leung, Charles Ka Yui & Shi, Song & Ho Tang, Edward Chi, 2013. "Commodity house prices," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 875-887.
    4. International Monetary Fund, 2011. "New Zealand: Selected Issues Paper," IMF Staff Country Reports 2011/103, International Monetary Fund.
    5. Ms. Yan M Sun, 2011. "From West to East: Estimating External Spillovers to Australia and New Zealand," IMF Working Papers 2011/120, International Monetary Fund.
    6. Reza Tajaddini & Timothy Falcon Crack & Helen Roberts, 2015. "Price and Earnings Momentum, Transaction Costs, and an Innovative Practitioner Technique," International Review of Finance, International Review of Finance Ltd., vol. 15(4), pages 555-597, December.

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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises

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