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Exchange Rate Dynamics of New Zealand

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  • Md. Shahnawaz Karim
  • Minsoo Lee
  • Christopher Gan

Abstract

This paper examines the exchange rate effects of monetary policy shocks in New Zealand in the framework of the international monetary transmission mechanism. The model variables are suggested by a hybrid New Open Economy Macroeconomic (NOEM) model. Our empirical analysis indicates plausible dynamic behaviour of nominal and real effective exchange rates in New Zealand due to unexpected monetary policy innovations, without any significant anomalies. In all cases, the impact effect of domestic monetary contraction is found to be an appreciation of the nominal and real effective exchange rates.

Suggested Citation

  • Md. Shahnawaz Karim & Minsoo Lee & Christopher Gan, 2007. "Exchange Rate Dynamics of New Zealand," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 10(3), pages 241-260.
    • Handle: RePEc:taf:jecprf:v:10:y:2007:i:3:p:241-260
    DOI: 10.1080/17487870701434443
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    References listed on IDEAS

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    1. Martin Eichenbaum & Charles L. Evans, 1995. "Some Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 975-1009.
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    5. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
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    7. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-144, January.
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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, Lincoln University, Department of Financial and Business Systems, vol. 5(01-2), pages 1-10, March.

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