IDEAS home Printed from https://ideas.repec.org/a/nzb/nzbbul/june20021.html
   My bibliography  Save this article

The role of the Reserve Bank's macro model in the formation of interest rate projections

Author

Listed:
  • Tim Hampton

    (Reserve Bank of New Zealand)

Abstract

The Reserve Bank of New Zealand is relatively unique in that our macroeconomic projections include a variable nominal interest rate path over the projection period. This approach is different from the constant nominal interest rate assumption used by most other central banks. In New Zealand, the interest rate projection is produced using a combination of the Bank's core macroeconomic model and policy-maker judgement. The model increases projected short-term interest rates when inflation is projected to be persistently high relative to target, and lowers interest rates when inflation is projected to be persistently low relative to target. In this sense, model projections are referred to as endogenous interest rate projections. This article explains the rationale for endogenous interest rate projections and why the Reserve Bank has adopted this approach.

Suggested Citation

  • Tim Hampton, 2002. "The role of the Reserve Bank's macro model in the formation of interest rate projections," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, June.
  • Handle: RePEc:nzb:nzbbul:june2002:1
    as

    Download full text from publisher

    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2002/2002jun65-2hampton.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Svensson, Lars E. O., 2002. "Inflation targeting: Should it be modeled as an instrument rule or a targeting rule?," European Economic Review, Elsevier, vol. 46(4-5), pages 771-780, May.
    2. Anonymous, 1997. "The Forecasting and Policy System: an introduction," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 60, September.
    3. Michael Woodford, 1999. "Optimal monetary policy inertia," Proceedings, Federal Reserve Bank of San Francisco.
    4. Chris Plantier & Dean Scrimgeour, 2002. "The Taylor Rule and its relevance to New Zealand monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, March.
    5. Mike Frith & Aaron Drew, 1998. "Forecasting at the Reserve Bank of New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 61, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Knüppel, Malte & Schultefrankenfeld, Guido, 2013. "The Empirical (Ir)Relevance of the Interest Rate Assumption for Central Bank Forecasts," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80042, Verein für Socialpolitik / German Economic Association.
    2. Bennett T. McCallum & Edward Nelson, 2005. "Targeting versus instrument rules for monetary policy," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 225-245.
    3. Michal Skořepa & Viktor Kotlán, 2006. "Inflation Targeting: To Forecast or To Simulate?," Prague Economic Papers, University of Economics, Prague, vol. 2006(4), pages 300-314.
    4. James Twaddle & David Hargreaves & Tim Hampton, 2006. "Other stabilisation objectives within an inflation targeting regime: Some stochastic simulation experiments," Reserve Bank of New Zealand Discussion Paper Series DP2006/04, Reserve Bank of New Zealand.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzb:nzbbul:june2002:1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reserve Bank of New Zealand Knowledge Centre) or (Joanne Lustig). General contact details of provider: http://edirc.repec.org/data/rbngvnz.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.