Should the Reserve Bank worry about the exchange rate?

Luan Nguyen

MPRA Paper from University Library of Munich, Germany

Abstract: This research paper is focused on estimating a set of parameters for a simple monetarypolicy model of New Zealand and calibrate these parameters to compute viability kernels. We found output gap to be persistent across our sample period. There is weak evidence of a downward sloping IS curve and an upward sloping Phillips curve. The estimation results for thereal exchange rate parameter in the IS equation and the uncovered interest rate parity do notconfirm the theoretical predictions. By calibrating the estimated parameters to our viability analysis, we recommend that the Reserve Bank should not worry about the exchange rate, the OCR be lowered further and increasing the scope of fiscal policy in sharing the burden with monetary policy.

Keywords: Monetary policy; Viability theory; Viability kernels; Central bank; Real exchange rate (search for similar items in EconPapers)
JEL-codes: E52 E58 E61 F41 (search for similar items in EconPapers)
Date: 2016-10-17
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:75519

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