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Kiwi drivers the New Zealand dollar experience

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    On 1 August 2011 the Reserve Bank s trade-weighted exchange rate index (TWI) rose to 75. The only previous time that this level was reached since the exchange rate was floated in 1985 was in July 2007. On both of these occasions, the high level of the TWI was matched by the ANZ commodity price index, which itself reached levels not seen in 30 years. The close timing of these peaks was almost certainly no coincidence. In this paper, we quantify this relationship and consider its importance for explaining the New Zealand dollar over the past 25 years relative to the many other influences, such as housing cycles and interest rate differentials.

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    File URL: http://www.rbnz.govt.nz/research_and_publications/analytical_notes/2012/an2012_2.pdf
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    Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Analytical Notes series with number AN2012/02.

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    Length: 20 p.
    Date of creation: May 2012
    Date of revision:
    Handle: RePEc:nzb:nzbans:2012/02
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    Web page: http://www.rbnz.govt.nz
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    1. Enzo Cassino & Zoe Wallis, 2010. "The New Zealand dollar through the global financial crisis," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 73, pages 20-30, September.
    2. Alfred A. Haug & Christie Smith, 2007. "Local linear impulse responses for a small open economy," Working Papers 0707, University of Otago, Department of Economics, revised Apr 2007.
    3. Bloor, Chris & Matheson, Troy, 2011. "Real-time conditional forecasts with Bayesian VARs: An application to New Zealand," The North American Journal of Economics and Finance, Elsevier, vol. 22(1), pages 26-42, January.
    4. Kenneth Rogoff & Yu-chin Chen, 2002. "Commodity Currencies and Empirical Exchange Rate Puzzles," IMF Working Papers 02/27, International Monetary Fund.
    5. Anella Munro, 2004. "What drives the New Zealand dollar?," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, june.
    6. Anne-Marie Brook & David Hargreaves, 2000. "A macroeconomic balance measure of New Zealand's equilibrium exchange rate," Reserve Bank of New Zealand Discussion Paper Series DP2000/09, Reserve Bank of New Zealand.
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