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The transmission mechanism of New Zealand monetary policy

Author

Listed:
  • Aaron Drew
  • Rishab Sethi

    (Reserve Bank of New Zealand)

Abstract

In the first of two articles on the transmission mechanism of New Zealand monetary policy, we provide a detailed account of the process by which changes in the Reserve Bank’s primary monetary policy instrument, the Official Cash Rate (OCR), eventually come to influence the general level of prices. As such, the article is a guide to how the Bank perceives policy decisions to propagate through the New Zealand economy, and to the relative weight it assigns to the strengths of the various channels that together comprise the transmission mechanism. A second article, to be published in a forthcoming issue of the Bulletin, considers how this mechanism may have changed over time and how this has influenced the implementation of monetary policy in the most recent business cycle.

Suggested Citation

  • Aaron Drew & Rishab Sethi, 2007. "The transmission mechanism of New Zealand monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, June.
  • Handle: RePEc:nzb:nzbbul:june2007:2
    as

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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2007/2007jun70-2drewsethi.pdf
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    References listed on IDEAS

    as
    1. Robert A Buckle & Kunhong Kim & Nathan McLellan, 2003. "The impact of monetary policy on New Zealand business cycles and inflation variability," Treasury Working Paper Series 03/09, New Zealand Treasury.
    2. Anella Munro, 2004. "What drives the New Zealand dollar?," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, june.
    3. Bayoumi, Tamim & Laxton, Douglas & Pesenti, Paolo, 2004. "Benefits and spillovers of greater competition in Europe: a macroeconomic assessment," Working Paper Series 341, European Central Bank.
    4. Aaron Drew, 2007. "New Zealand's productivity performance and prospects," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, March.
    5. David Hargreaves & Hannah Kite & Bernard Hodgetts, 2006. "Modelling New Zealand inflation in a Phillips curve," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, September.
    6. Aaron Drew & Mike Kennedy & Torsten Sløk, 2004. "Differences in Resilience Between the Euro-Area and US Economies," OECD Economics Department Working Papers 382, OECD Publishing.
    7. Leslie Hull, 2003. "Financial deregulation and household indebtedness," Reserve Bank of New Zealand Discussion Paper Series DP2003/01, Reserve Bank of New Zealand.
    8. Michael Graff, 2004. "Estimates of the output gap in real time: how well have we been doing?," Reserve Bank of New Zealand Discussion Paper Series DP 2004/04, Reserve Bank of New Zealand.
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    Cited by:

    1. Hsing, Yu, 2009. "Analysis of the Behavior of the New Zealand Dollar Exchange Rate: Comparison of Four Major Models," Review of Applied Economics, Review of Applied Economics, vol. 5(1-2).
    2. Adam Richardson & Rebecca Williams, 2015. "Estimating New Zealand’s neutral interest rate," Reserve Bank of New Zealand Analytical Notes series AN2015/05, Reserve Bank of New Zealand.
    3. Jacek Krawczyk & Kunhong Kim, 2014. "Viable Stabilising Non-Taylor Monetary Policies for an Open Economy," Computational Economics, Springer;Society for Computational Economics, vol. 43(2), pages 233-268, February.

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