Would adopting the Australian dollar provide superior monetary policy in New Zealand?

Aaron Drew (), Viv Hall, Christopher McDermott and Robert St. Clair
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Robert St. Clair: Reserve Bank of New Zealand, http://www.rbnz.govt.nz

No DP2001/03, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: Counterfactual experiments with the Reserve Bank of New Zealand's core model provide some insight into the implications for New Zealand's economic performance over the 1990s, had it credibly fixed its currency to the Australian dollar. If New Zealand had faced the relatively more stimulatory Australian monetary conditions prevailing over the 1990s, then output growth may have been temporarily boosted. However, demand pressures would have probably been greater and inflation higher. In particular, results suggest that over the latter part of the 1990s annual inflation would have been around 1 percentage point higher on average. Stochastic simulation experiments provide a vehicle to analyse what the implications of currency union might be more generally. Results suggest that if New Zealand were to lose its ability to set monetary policy independently, then the variability of inflation and output would increase over the business cycle.

JEL-codes: E17 E31 E58 F36 (search for similar items in EconPapers)
Pages: 28p
Date: 2001-08
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Citations: View citations in EconPapers (17)

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Journal Article: Would adopting the Australian dollar provide superior monetary policy in New Zealand? (2004)
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