Interpreting clause 4(b) of the Policy Targets Agreement: avoiding unnecessary instability in output, interest rates and the exchange rate

Chris Hunt
Additional contact information
Chris Hunt: Reserve Bank of New Zealand

Reserve Bank of New Zealand Bulletin, 2004, vol. 67, No 2

Abstract: In clause 2(b) of the Policy Targets Agreement (PTA) between the Minister of Finance and Governor of the Reserve Bank, the target used to direct the Reserve Bank's pursuit of price stability is expressed as "future CPI inflation outcomes between 1 per cent and 3 per cent on average over the medium term." While the Reserve Bank has the independence to choose when and how to adjust policy settings so as to achieve the target, another clause of the PTA provides guidelines as to how this freedom should be used. In clause 4(b) of the PTA, the Minister of Finance and the Governor agree that, in using monetary policy to pursue price stability, the Bank shall take account of the implications of its actions for instability in economic output, interest rates, and the exchange rate. This article describes how clause 4(b) affects monetary policy decision-making, and reviews the role of clause 4(b) in the current operation of monetary policy.

Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.rbnz.govt.nz/-/media/ReserveBank/Files/ ... 2004june67-2hunt.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbbul:june2004:2

Access Statistics for this article

More articles in Reserve Bank of New Zealand Bulletin from Reserve Bank of New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Reserve Bank of New Zealand Knowledge Centre ().