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Extending the Reserve Bank’s macroeconomic balance model of the exchange rate

The exchange rate matters a lot in New Zealand and the Reserve Bank uses several different models, each imprecise, to analyse it. This note focuses on just one of those approaches: the macro-balance model of the exchange rate. We use that model to estimate the exchange rate which, if sustained, would stabilise at around current levels the negative net international investment position (as a percentage of GDP). The sensitivity of the model estimates to some of the key assumptions is illustrated.

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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 AN2012/08.

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Length: 17 p.
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:nzb:nzbans:2012/08
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  1. G. Russell Kincaid & Martin Fetherston & Peter Isard & Hamid Faruqee, 2001. "Methodology for Current Account and Exchange Rate Assessments," IMF Occasional Papers 209, International Monetary Fund.
  2. Hali J. Edison & Francis Vitek, 2009. "Australia and New Zealand Exchange Rates: A Quantitative Assessment," IMF Working Papers 09/7, International Monetary Fund.
  3. Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca Antonio Ricci & Gian-Maria Milesi-Ferretti, 2008. "Exchange Rate Assessments: CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
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