Date 15 December 2011
The Reserve Bank today released the last issue of the Reserve Bank Bulletin for 2011.
The first article in this edition looks at consumption spending. Fluctuations in this type of spending can affect pressure on resources, a key influence on monetary policy decisions. The article examines New Zealand data for the last decade and finds that the recent large increase in house prices may have influenced consumer spending less than often thought.
The topical issue of financial crises is the focus of the second article. This piece considers international literature on other countries’ experiences over recent decades and reflects on New Zealand’s vulnerabilities in light of that experience. The literature suggests that countries whose debt is denominated in foreign currency, or if the country is part of a fixed exchange rate arrangement, can be particularly vulnerable if offshore funding dries up. New Zealand’s debt is mostly in New Zealand dollars, and it has a freely floating exchange rate.
The December Bulletin rounds out with a look at the Reserve Bank’s new solvency (or capital adequacy) standards, being put in place for insurance companies. Of particular relevance, in light of Canterbury earthquake insurance claims, is discussion on the appropriate amount of capital that should be held by insurance companies against the risk of catastrophic events.
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