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External Imbalances and Macroeconomic Policy in New Zealand

  • Philip R. Lane


    (Institute for International Integration Studies, Trinity College Dublin)

This paper argues that large external imbalances pose signifi?cant macroeconomic risks for New Zealand. While New Zealand has coped well in recent years, the global fi?nancial crisis has underlined the vulnerability of defi?cit countries to fi?nancial shocks. New Zealand can draw important lessons from the global crisis by adjusting its macroeconomic policy framework to further mitigate the risks embedded in its international balance sheet.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp376.

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Length: 44 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:iis:dispap:iiisdp376
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  1. Martin Schmitz, 2014. "Financial remoteness and the net external position," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(1), pages 191-219, February.
  2. A. S. Benetrix & P. R. Lane, 2013. "Fiscal Shocks and the Real Exchange Rate," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 6-37, September.
  3. Diarmaid Addison-Smyth & Kieran McQuinn, 2010. "Quantifying Revenue Windfalls from the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 41(2), pages 201-233.
  4. Roel Beetsma & Massimo Giuliodori & Franc Klaassen, 2008. "The Effects of Public Spending Shocks on Trade Balances and Budget Deficits in the European Union," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 414-423, 04-05.
  5. Galstyan, Vahagn A. & Lane, Philip R., 2008. "The Composition of Government Spending and the Real Exchange Rate," CEPR Discussion Papers 6903, C.E.P.R. Discussion Papers.
  6. Kim, Kunhong & Hall, Viv B. & Buckle, Robert A., 2006. "Consumption-smoothing in a small, cyclically volatile open economy: Evidence from New Zealand," Journal of International Money and Finance, Elsevier, vol. 25(8), pages 1277-1295, December.
  7. Richard Fabling & Arthur Grimes & Lynda Sanderson, 2011. "Whatever next? Export market choices of New Zealand firms," ERSA conference papers ersa10p367, European Regional Science Association.
  8. Luca Antonio Ricci & Gian Maria Milesi‐Ferretti & Jaewoo Lee, 2013. "Real Exchange Rates and Fundamentals: A Cross‐Country Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(5), pages 845-865, 08.
  9. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, number 8973, 01-2013.
  10. Carmen Reinhart & M. Belen Sbrancia, 2015. "The Liquidation of Government Debt," IMF Working Papers 15/7, International Monetary Fund.
  11. Oscar Parkyn, 2010. "Estimating New Zealand's Structural Budget Balance," Treasury Working Paper Series 10/08, New Zealand Treasury.
  12. Ganelli, Giovanni, 2003. "The New Open Economy Macroeconomics of Government Debt," Royal Economic Society Annual Conference 2003 83, Royal Economic Society.
  13. Lars Calmfors, 2003. "Fiscal Policy to Stabilise the Domestic Economy in the EMU: What Can We Learn from Monetary Policy?," CESifo Economic Studies, CESifo, vol. 49(3), pages 319-353.
  14. Alberto Alesina & Filipe Campante & Guido Tabellini, . "Why is Fiscal Policy Often Procyclical?," Working Paper 248206, Harvard University OpenScholar.
  15. Michael B. Devereux & James Yetman, 2010. "Leverage Constraints and the International Transmission of Shocks," Working Papers 132010, Hong Kong Institute for Monetary Research.
  16. André Faria & Philip R. Lane & Paolo Mauro & Gian Maria Milesi-Ferretti, 2007. "The Shifting Composition of External Liabilities," The Institute for International Integration Studies Discussion Paper Series iiisdp190, IIIS.
  17. Ravn, Morten O & Schmitt-Grohé, Stephanie & Uribe, Martín, 2007. "Explaining the Effects of Government Spending Shocks on Consumption and the Real Exchange Rate," CEPR Discussion Papers 6541, C.E.P.R. Discussion Papers.
  18. James Feyrer & Jay C. Shambaugh, 2009. "Global Savings and Global Investment: The Transmission of Identified Fiscal Shocks," NBER Working Papers 15113, National Bureau of Economic Research, Inc.
  19. Raghuram G. Rajan, 2010. "Fault Lines: How Hidden Fractures Still Threaten the World Economy," Economics Books, Princeton University Press, edition 1, number 9111, 01-2013.
  20. Sebastian Edwards, 2006. "External Imbalances in an Advanced, Commodity-Exporting Country: The Case of New Zealand," NBER Working Papers 12620, National Bureau of Economic Research, Inc.
  21. Paul Bedford, 2008. "The global financial crisis and its transmission to New Zealand – an external balance sheet analysis," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 71, December.
  22. Katrin Assenmacher-Wesche & Stefan Gerlach, 2010. "Monetary policy and financial imbalances: facts and fiction," Economic Policy, CEPR;CES;MSH, vol. 25, pages 437-482, 07.
  23. Patrick Honohan, 2008. "Risk Management and the Costs of the Banking Crisis," National Institute Economic Review, National Institute of Economic and Social Research, vol. 206(1), pages 15-24, October.
  24. Xavier Debrun & Manmohan S. Kumar, 2007. "The Discipline-Enhancing Role of Fiscal Institutions; Theory and Empirical Evidence," IMF Working Papers 07/171, International Monetary Fund.
  25. John Geanakoplos, 2009. "The Leverage Cycle," Cowles Foundation Discussion Papers 1715, Cowles Foundation for Research in Economics, Yale University.
  26. Korinek, Anton & Serven, Luis, 2010. "Undervaluation through foreign reserve accumulation : static losses, dynamic gains," Policy Research Working Paper Series 5250, The World Bank.
  27. Vahagn Galstyan and Philip R. Lane, 2008. "External Imbalances and the Extensive Margin of Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp259, IIIS.
  28. Nathalie Girouard & Robert W. R. Price, 2004. "Asset Price Cycles, “One-Off” Factors and Structural Budget Balances," OECD Economics Department Working Papers 391, OECD Publishing.
  29. Jonathan David Ostry & Atish R. Ghosh & Karl F Habermeier & Marcos d Chamon & Mahvash S Qureshi & Dennis B. S. Reinhardt, 2010. "Capital Inflows; The Role of Controls," IMF Staff Position Notes 2010/04, International Monetary Fund.
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