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The implementation of monetary policy in New Zealand: What factors affect the 90-day bank bill rate?

  • Guender, Alfred V.
  • Rimer, Oyvinn

This paper discusses the implementation of monetary policy in New Zealand and its flow-on effects on the 90-day bank bill rate over the 1999-2005 period. The effects of external factors are considered as well. Our findings indicate that the maturity spectrum ratio exerted a positive effect on the 90-day bank bill rate while the allotment ratio did not. This interest rate had a tendency to revert to the level set by its Australian counterpart, though at a relatively slow speed. No such link exists between the NZ 90-day rate and the U.S. 90-day rate. Neither the maturity spectrum nor the allotment ratio contributed to the volatility of the most important short-term interest rate in New Zealand.

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Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 19 (2008)
Issue (Month): 2 (August)
Pages: 215-234

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Handle: RePEc:eee:ecofin:v:19:y:2008:i:2:p:215-234
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  1. Jan Frazer, 2004. "Liquidity management in the New Zealand banking system," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, December.
  2. Dieter Nautz & Jörg Oechssler, 2001. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Bonn Econ Discussion Papers bgse9_2001, University of Bonn, Germany.
  3. Gabriel Pérez Quirós & Hugo Rodríguez Mendizábal, 2003. "The daily market for funds in Europe: what has changed with the EMU," Banco de Espa�a Working Papers 0313, Banco de Espa�a.
  4. Ian Nield, 2006. "Changes to liquidity management regime," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 6p, December.
  5. Thomas J. Jordan & Peter Kugler, 2004. "Implementing Swiss Monetary Policy: Steering the 3M-Libor with Repo Transactions," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 381-393, September.
  6. Michael Woodford, 2001. "Monetary policy in the information economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 297-370.
  7. David Archer & Andy Brookes & Michael Reddell, 1999. "A cash rate system for implementing monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
  8. Dieter Nautz & Christian J. Offermanns, 2007. "The dynamic relationship between the euro overnight rate, the ECB's policy rate and the term spread," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(3), pages 287-300.
  9. Leonardo Bartolini & Alessandro Prati, 2003. "Cross-country differences in monetary policy execution and money market rates' volatility," Staff Reports 175, Federal Reserve Bank of New York.
  10. Ayuso, J. & Repullo, R., 2000. "A Model of the Open Market Operations of the European Central Bank," Papers 0011, Centro de Estudios Monetarios Y Financieros-.
  11. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
  12. Andy Brookes & Tim Hampton, 2000. "The Official Cash Rate one year on," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, June.
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