IDEAS home Printed from https://ideas.repec.org/a/nzb/nzbbul/june20042.html
   My bibliography  Save this article

Interpreting clause 4(b) of the Policy Targets Agreement: avoiding unnecessary instability in output, interest rates and the exchange rate

Author

Listed:
  • Chris Hunt

    (Reserve Bank of New Zealand)

Abstract

In clause 2(b) of the Policy Targets Agreement (PTA) between the Minister of Finance and Governor of the Reserve Bank, the target used to direct the Reserve Bank's pursuit of price stability is expressed as "future CPI inflation outcomes between 1 per cent and 3 per cent on average over the medium term." While the Reserve Bank has the independence to choose when and how to adjust policy settings so as to achieve the target, another clause of the PTA provides guidelines as to how this freedom should be used. In clause 4(b) of the PTA, the Minister of Finance and the Governor agree that, in using monetary policy to pursue price stability, the Bank shall take account of the implications of its actions for instability in economic output, interest rates, and the exchange rate. This article describes how clause 4(b) affects monetary policy decision-making, and reviews the role of clause 4(b) in the current operation of monetary policy.

Suggested Citation

  • Chris Hunt, 2004. "Interpreting clause 4(b) of the Policy Targets Agreement: avoiding unnecessary instability in output, interest rates and the exchange rate," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, june.
  • Handle: RePEc:nzb:nzbbul:june2004:2
    as

    Download full text from publisher

    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2004/2004june67-2hunt.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Peter Ledingham & Andrew Rodgers & Allison Stinson & Banking System Department, 2000. "Recent developments in the payment system," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, December.
    2. Geof Mortlock & Ian Woolford, 2003. "Financial sector assessment programme," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 66, March.
    3. Andrew Rodgers, 2001. "Foreign exchange settlement risk survey," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, 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. Dean Ford & Elizabeth Kendall & Adam Richardson, 2015. "Evaluating monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 78, pages 3-21, November.
    2. Christie Smith, 2004. "The long-run effects of monetary policy on output growth," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, September.
    3. Ross Kendall & Tim Ng, 2013. "The 2012 Policy Targets Agreement: an evolution in flexible inflation targeting in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 76, pages 3-12, December.

    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:june2004:2. 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). 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.

    We have no references for this item. You can help adding them by using 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.