How bubbly is the New Zealand dollar?
This paper tests for the existence of bubbles in the value of the New Zealand dollar. A common definition of an asset price bubble is the existence of explosive dynamics. This paper tests for periods of explosiveness in the New Zealand dollar measured at a monthly and quarterly frequency. To determine whether, during any explosive changes, the exchange rate was disconnected from changes in relative economic fundamentals, these tests are also applied to three models of exchange rate determination. This paper finds no evidence of episodes when either the New Zealand dollar or its fundamentals were explosive.