IDEAS home Printed from https://ideas.repec.org/p/ces/ifowps/_266.html
   My bibliography  Save this paper

Central Bank Independence in New Zealand: Public Knowledge About and Attitude Towards the Policy Target Agreement

Author

Listed:
  • Bernd Hayo
  • Florian Neumeier

Abstract

Employing unique representative survey data from New Zealand collected in 2016, we study public knowledge about and attitude towards a specific monetary policy institution, the Policy Target Agreement (PTA). The PTA contains the inflation target for the Reserve Bank of New Zealand (RBNZ). First, we assess how much the population knows about the PTA, finding the level of knowledge to be low. Second, we ask whether our respondents support a clause in the PTA that allows the government to over-ride the RBNZ if it deems it necessary. We interpret responses to that question as attitudes towards central bank independence (CBI). The population does not appear to have a clear view on whether or not to expand CBI, as roughly one third supports the overriding clause in the PTA, one third is against it, and one third is unsure. Using logit regression, we study which characteristics make people favour more CBI. Subjective and objective knowledge about the RBNZ and monetary policy increases support for CBI, whereas voting for a national-oriented party and trusting the government reduces it. Policy implications are derived from our findings.

Suggested Citation

  • Bernd Hayo & Florian Neumeier, 2018. "Central Bank Independence in New Zealand: Public Knowledge About and Attitude Towards the Policy Target Agreement," ifo Working Paper Series 266, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_266
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/wp-2018-266-hayo-neumeier-central-bank-new-zealand.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    2. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-286, March.
    3. King, Gary & Roberts, Margaret E., 2015. "How Robust Standard Errors Expose Methodological Problems They Do Not Fix, and What to Do About It," Political Analysis, Cambridge University Press, vol. 23(2), pages 159-179, April.
    4. Bernd Hayo & Florian Neumeier, 2022. "Households’ inflation perceptions and expectations: survey evidence from New Zealand," International Economics and Economic Policy, Springer, vol. 19(1), pages 185-217, February.
    5. N. Nergiz Dincer & Barry Eichengreen, 2014. "Central Bank Transparency and Independence: Updates and New Measures," International Journal of Central Banking, International Journal of Central Banking, vol. 10(1), pages 189-259, March.
    6. Walsh, Carl E, 1995. "Is New Zealand's Reserve Bank Act of 1989 an Optimal Central Bank Contract?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1179-1191, November.
    7. Alan S. Blinder, 2008. "Talking about Monetary Policy: The Virtues (and Vices?) of Central Bank Communication," Working Papers 1048, Princeton University, Department of Economics, Center for Economic Policy Studies..
    8. Bernd Hayo & Ummad Mazhar, 2014. "Monetary Policy Committee Transparency: Measurement, Determinants, and Economic Effects," Open Economies Review, Springer, vol. 25(4), pages 739-770, September.
    9. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    10. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    11. Helge Berger & Jakob De Haan & Sylvester C.W. Eijffinger, 2001. "Central Bank Independence: An Update of Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 3-40, February.
    12. Easterly, William & Fischer, Stanley, 2001. "Inflation and the Poor," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 160-178, May.
    13. Hayo, Bernd & Neuenkirch, Edith, 2014. "The German public and its trust in the ECB: The role of knowledge and information search," Journal of International Money and Finance, Elsevier, vol. 47(C), pages 286-303.
    14. Alesina, Alberto & Stella, Andrea, 2010. "The Politics of Monetary Policy," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 18, pages 1001-1054, Elsevier.
    15. Carin van der Cruijsen & David-Jan Jansen & Jakob de Haan, 2015. "How Much Does the Public Know about the ECB’s Monetary Policy? Evidence from a Survey of Dutch Households," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 169-218, December.
    16. Binder, Carola, 2017. "Fed speak on main street: Central bank communication and household expectations," Journal of Macroeconomics, Elsevier, vol. 52(C), pages 238-251.
    17. Bernd Hayo & Florian Neumeier, 2016. "Survey on New Zealanders’ Attitudes Towards and Knowledge of Macroeconomic Policy Issues: Documentation of Survey Methodology and Descriptive Results," MAGKS Papers on Economics 201630, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    18. Bernd Hayo & Edith Neuenkirch, 2018. "The influence of media use on layperson monetary policy knowledge in Germany," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(1), pages 1-26, February.
    19. Marco Arnone & Bernard J Laurens & Jean-François Segalotto & Martin Sommer, 2009. "Central Bank Autonomy: Lessons from Global Trends," IMF Staff Papers, Palgrave Macmillan, vol. 56(2), pages 263-296, June.
    20. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
    21. Hayo, Bernd, 1998. "Inflation culture, central bank independence and price stability," European Journal of Political Economy, Elsevier, vol. 14(2), pages 241-263, May.
    22. repec:pri:cepsud:161blinder is not listed on IDEAS
    23. Bernd Hayo & Florian Neumeier, 2021. "Explaining central bank trust in an inflation-targeting country: the case of the Reserve Bank of New Zealand," Oxford Economic Papers, Oxford University Press, vol. 73(1), pages 27-48.
    24. Andrew Haldane & Michael McMahon, 2018. "Central Bank Communications and the General Public," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 578-583, May.
    25. Bunn, Philip & Pugh, Alice & Yeates, Chris, 2018. "The distributional impact of monetary policy easing in the UK between 2008 and 2014," Bank of England working papers 720, Bank of England.
    26. Siklos,Pierre L. & Bohl,Martin T. & Wohar,Mark E. (ed.), 2010. "Challenges in Central Banking," Cambridge Books, Cambridge University Press, number 9780521199292, September.
    27. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
    28. Helge Berger & Jakob De Haan, 1999. "A State Within the State? An Event Study on the Bundesbank (1948–1973)," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(1), pages 17-39, February.
    29. N. Nergiz Dincer & Barry Eichengreen, 2007. "Central Bank Transparency: Where, Why, and with What Effects?," NBER Working Papers 13003, National Bureau of Economic Research, Inc.
    30. Alan S. Blinder, 2018. "Through a Crystal Ball Darkly: The Future of Monetary Policy Communication," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 567-571, May.
    31. Otmar Issing, 1999. "The Eurosystem: Transparent andAccountable or ‘Willem in Euroland’," Journal of Common Market Studies, Wiley Blackwell, vol. 37(3), pages 503-519, September.
    32. van Lelyveld, Iman, 1999. "Inflation or unemployment? Who cares?," European Journal of Political Economy, Elsevier, vol. 15(3), pages 463-484, September.
    33. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-167, March.
    34. de Jong, Eelke, 2002. "Why are price stability and statutory independence of central banks negatively correlated? The role of culture," European Journal of Political Economy, Elsevier, vol. 18(4), pages 675-694, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hayo, Bernd & Neumeier, Florian, 2020. "Public knowledge about and attitudes towards central bank independence in New Zealand," Journal of Banking & Finance, Elsevier, vol. 113(C).
    2. Bernd Hayo & Florian Neumeier, 2021. "Explaining central bank trust in an inflation-targeting country: the case of the Reserve Bank of New Zealand," Oxford Economic Papers, Oxford University Press, vol. 73(1), pages 27-48.
    3. Donato Masciandaro & Davide Romelli, 2019. "Behavioral Monetary Policymaking: Economics, Political Economy and Psychology," World Scientific Book Chapters, in: Behavioral Finance The Coming of Age, chapter 9, pages 285-329, World Scientific Publishing Co. Pte. Ltd..
    4. Alan S. Blinder & Michael Ehrmann & Jakob de Haan & David-Jan Jansen, 2024. "Central Bank Communication with the General Public: Promise or False Hope?," Journal of Economic Literature, American Economic Association, vol. 62(2), pages 425-457, June.
    5. Ngomba Bodi, Francis Ghislain & Tadadjeu Wemba, Dessy-Karl & Soulemanou, Soulemanou, 2020. "Transparence des Banques Centrales et efficacité de la politique monétaire : quelles implications pour la Banque des Etats de l’Afrique Centrale ? [Central Bank's Transparency and effectiveness of ," MPRA Paper 116436, University Library of Munich, Germany.
    6. Bernd Hayo & Florian Neumeier, 2022. "Households’ inflation perceptions and expectations: survey evidence from New Zealand," International Economics and Economic Policy, Springer, vol. 19(1), pages 185-217, February.
    7. Masciandaro, Donato & Romelli, Davide, 2015. "Ups and downs of central bank independence from the Great Inflation to the Great Recession: theory, institutions and empirics," Financial History Review, Cambridge University Press, vol. 22(3), pages 259-289, December.
    8. Hayo, Bernd & Hefeker, Carsten, 2002. "Reconsidering central bank independence," European Journal of Political Economy, Elsevier, vol. 18(4), pages 653-674, November.
    9. Günes Kamber & Özer Karagedikli & Christie Smith, 2015. "Applying an Inflation-Targeting Lens to Macroprodential Policy "Institutions"," International Journal of Central Banking, International Journal of Central Banking, vol. 11(4), pages 395-429, September.
    10. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    11. Donato Masciandaro & Davide Romelli, 2018. "To Be or not to Be a Euro Country? The Behavioural Political Economics of Currency Unions," BAFFI CAREFIN Working Papers 1883, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    12. Hwang, In Do & Lustenberger, Thomas & Rossi, Enzo, 2021. "Does communication influence executives’ opinion of central bank policy?☆," Journal of International Money and Finance, Elsevier, vol. 115(C).
    13. Bernd Hayo & Ummad Mazhar, 2014. "Monetary Policy Committee Transparency: Measurement, Determinants, and Economic Effects," Open Economies Review, Springer, vol. 25(4), pages 739-770, September.
    14. Ehrmann, Michael & Wabitsch, Alena, 2022. "Central bank communication with non-experts – A road to nowhere?," Journal of Monetary Economics, Elsevier, vol. 127(C), pages 69-85.
    15. Coibion, Olivier & Gorodnichenko, Yuriy & Kumar, Saten & Pedemonte, Mathieu, 2020. "Inflation expectations as a policy tool?," Journal of International Economics, Elsevier, vol. 124(C).
    16. Müller, Lena Sophia & Glas, Alexander, 2021. "Talking in a language that everyone can understand? Transparency of speeches by the ECB Executive Board," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242364, Verein für Socialpolitik / German Economic Association.
    17. Brouwer, Nils & de Haan, Jakob, 2022. "The impact of providing information about the ECB’s instruments on inflation expectations and trust in the ECB: Experimental evidence," Journal of Macroeconomics, Elsevier, vol. 73(C).
    18. Giuseppe Ciccarone & Enrico Marchetti, 2012. "Optimal linear contracts under common agency and uncertain central bank preferences," Public Choice, Springer, vol. 150(1), pages 263-282, January.
    19. Donato Masciandaro & Davide Romelli, 2016. "From Silence to Voice: Monetary Policy, Central Bank Governance and Communication," BAFFI CAREFIN Working Papers 1627, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    20. Lena Dräger, 2023. "Central Bank Communication with the General Public," CESifo Working Paper Series 10713, CESifo.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ces:ifowps:_266. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/ifooode.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.