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The Implementation of Monetary Policy in New Zealand: What Factors Affect the 90-Day Bank Bill Rate?

This paper discusses the implementation of monetary policy in New Zealand and its flow-on effects on the 90-day bank bill rate over the 1999-2005 period. The effects of external factors are considered as well. Our findings indicate that the maturity spectrum ratio exerted a positive effect on the 90-day rate while the allotment ratio did not. This interest rate had a tendency to revert to the level set by its Australian counterpart. No such link exists between the NZ 90-day rate and the US 90-day rate. Neither the maturity spectrum nor the allotment ratio contributed to the volatility of the New Zealand 90-day rate.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0705.pdf
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Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 07/05.

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Length: 31 pages
Date of creation: 29 Oct 2007
Date of revision:
Handle: RePEc:cbt:econwp:07/05
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Web page: http://www.econ.canterbury.ac.nz

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  1. Dieter Nautz & Christian J. Offermanns, 2007. "The dynamic relationship between the euro overnight rate, the ECB's policy rate and the term spread," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(3), pages 287-300.
  2. Bartolini, Leonardo & Prati, Alessandro, 2006. "Cross-country differences in monetary policy execution and money market rates' volatility," European Economic Review, Elsevier, vol. 50(2), pages 349-376, February.
  3. Quiros, Gabriel Perez & Mendizabal, Hugo Rodriguez, 2006. "The Daily Market for Funds in Europe: What Has Changed with the EMU?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 91-118, February.
  4. Ayuso, J. & Repullo, R., 2000. "A Model of the Open Market Operations of the European Central Bank," Papers 0011, Centro de Estudios Monetarios Y Financieros-.
  5. Dieter Nautz & Jörg Oechssler, 2001. "The Repo Auctions of the European Central Bank and the Vanishing Quota Puzzle," Bonn Econ Discussion Papers bgse9_2001, University of Bonn, Germany.
  6. Kenneth N. Kuttner, 2000. "Monetary policy surprises and interest rates: evidence from the Fed funds futures markets," Staff Reports 99, Federal Reserve Bank of New York.
  7. Ian Nield, 2006. "Changes to liquidity management regime," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 6p, December.
  8. Thomas J. Jordan & Peter Kugler, 2004. "Implementing Swiss Monetary Policy: Steering the 3M-Libor with Repo Transactions," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 381-393, September.
  9. Jan Frazer, 2004. "Liquidity management in the New Zealand banking system," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, December.
  10. Michael Woodford, 2001. "Monetary Policy in the Information Economy," NBER Working Papers 8674, National Bureau of Economic Research, Inc.
  11. David Archer & Andy Brookes & Michael Reddell, 1999. "A cash rate system for implementing monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
  12. Andy Brookes & Tim Hampton, 2000. "The Official Cash Rate one year on," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, June.
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