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What drives the New Zealand dollar?

  • Anella Munro

    (Reserve Bank of New Zealand)

This article draws together some of our recent exchange rate research. The research is interpreted against an asset price view of the exchange rate, which has become increasingly relevant as foreign exchange market turnover has become dominated by capital market transactions unrelated to trade in goods and services. Factors that affect expected relative returns on New Zealand dollar assets (eg interest rates, export commodity prices, fixed asset prices and a notion of equilibrium) are found to explain a considerable part of exchange rate cycles, even though they explain only a small part of short-term exchange rate fluctuations. The sources of the relative stability of the Australia-New Zealand bilateral exchange rate and the larger variation of the New Zealand-United States bilateral exchange rate are explored.

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File URL: http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2004/2004june67_2munro.pdf
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Article provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.

Volume (Year): 67 (2004)
Issue (Month): (june)
Pages:

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Handle: RePEc:nzb:nzbbul:june2004:3
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  1. Obstfeld, Maurice & Shambaugh, Jay C & Taylor, Alan M., 2004. "The Trilemma in History: Trade-offs Among Exchange Rates, Monetary Policies and Capital Mobility," CEPR Discussion Papers 4352, C.E.P.R. Discussion Papers.
  2. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange rate pass-through into import prices: a macro or micro phenomenon?," Staff Reports 149, Federal Reserve Bank of New York.
  3. José Manuel Campa & Linda S. Goldberg, 2005. "Exchange Rate Pass-Through into Import Prices," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 679-690, November.
  4. Kenneth D. West, 2004. "Monetary Policy and the Volatility of Real Exchange Rates in New Zealand," NBER Working Papers 10280, National Bureau of Economic Research, Inc.
  5. Charles Engel & James C. Morley, 2001. "The Adjustment of Prices and the Adjustment of the Exchange Rate," NBER Working Papers 8550, National Bureau of Economic Research, Inc.
  6. David Hargreaves, 2003. "Monetary policy and the volatility of real exchange rates in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 66, pages 2, September.
  7. Allsop, Christopher & Vines, David, 2000. "The Assessment: Macroeconomic Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 16(4), pages 1-32, Winter.
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