Reserve Bank of New Zealand Bulletin articles

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March 2010 (Vol. 73, No. 1)

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Articles

The crisis and the Reserve Bank’s stabilisation role (129KB)
By Bevan Cook and Felix Delbrück

The global financial crisis and subsequent recession have highlighted the huge costs that financial imbalances can impose on an economy. Because the financial crisis was in large part the result of specific vulnerabilities in the banking sector, reform proposals are accordingly focused on improving the resilience of the global financial system by ensuring that financial institutions’ risk management adequately takes account of systemic risks. While our banks have emerged relatively unscathed from the crisis, New Zealand has suffered a long recession. This article discusses these debates in both the global and New Zealand context.

Twenty years of inflation targeting (PDF 135KB)
By David Baqaee and Christie Smith

In December 2009 the Reserve Bank of New Zealand, in conjunction with Northwestern University’s Centre for International Economics and Development (CIED), hosted a monetary policy conference to mark the 20th anniversary of the Reserve Bank of New Zealand Act. Passed in December 1989, the Act was one of the seminal events in the development of inflation targeting as a monetary policy regime. As of 2009, 26 countries have explicitly adopted inflation targeting, including Canada, the UK, Australia, Sweden and Norway.

The decline in global economic activity in 2009 – now being termed ‘the Great Recession’ in the US – has prompted renewed scrutiny of macroeconomic stabilisation policy, financial systems, and the regulatory frameworks within which financial institutions operate.

Inflation targeting, the financial crisis and macroeconomics; an interview with Mark Gertler (PDF 83KB)
Interviewed by Ozer Karagedikli

Few people have had such strong influence on macroeconomics in general and on the New Keynesian School of macroeconomics as Mark Gertler has. His work with Ben Bernanke and Simon Gilchrist on the role of credit and financial conditions on business cycles, and with Ben Bernanke on whether the central banks should respond to asset price bubbles, are some examples of his influential work.

As part of the 2009 conference, Gertler visited the Reserve Bank of New Zealand. Özer Karagedikli from the Economics Department of the Reserve Bank interviewed him.

How may the New Architecture of Financial Regulations develop? (PDF 78KB)
By Charles Goodhart

Professor Charles Goodhart CBE, FBA, is the 2010 Professorial Fellow in Monetary and Financial Economics at the Reserve Bank and Victoria University of Wellington. He is a member of the Financial Markets Group at the London School of Economics, having previously been its Deputy Director. Until his retirement in 2002, he had been the Norman Sosnow Professor of Banking and Finance at the London School of Economics.

As part of his Professorial visit, he gave a public lecture on the new architecture of financial regulations at Victoria University of Wellington. This provides a transcription of his comments on this occasion.

Lessons from previous U.S. recessions and recoveries (PDF 1.1MB)
By Satish Ranchod

The US economy is emerging from a period of significant weakness. This article examines how US economic activity evolved during previous post-WWII recessions and recoveries, and considers what this indicates for the current period. Recoveries following previous US recessions have tended to be rapid and primarily a result of strength in the household sector. However, previous US recessions have not been associated with the significant financial disruptions that occurred during the global financial crisis. Recoveries in other economies following financial crises have tended to be protracted, especially when associated with synchronised global slowdowns. Given current economic conditions, particularly the weakness in the household sector, the current US recovery is likely to be quite gradual. Consequently, recovery is likely to be more akin to the protracted recoveries seen in other economies following financial crises, rather than the rapid recoveries that have typically followed other post-WWII recessions in the US.

The crisis and monetary policy: what we learned and where we are going (130KB)
By Alan Bollard and Felix Delbrück

Inflation targeting is a monetary policy framework that was developed in response to the high inflation and macroeconomic instability of the 1970s and 1980s. Twenty years ago, New Zealand was the first country to formally adopt key elements of this approach – such as an explicit inflation target and various accountability and monitoring structures – in the Reserve Bank Act 1989. The framework has been durable, even as we’ve continued to learn how the economy works and continued to adapt and refine the way we do monetary policy. The past two decades have included one of the longest periods of growth that New Zealand has seen in decades, as well as droughts, migration shocks, terms of trade changes, an Asian crisis, a dot com boom and bust, and, most recently, the worst global economic and financial crisis seen in generations. This speech looks back over those two decades of inflation targeting to see what lessons we can draw from these experiences, as well as outlining some of the challenges ahead.

Recent trends and developments in currency (PDF 140KB)
By Kristin Langwasser

This article describes the recent trends and developments in New Zealand’s currency. In particular, the article reports on trends in the use of currency in connection with the Reserve Bank’s currency function and goals. Section 2 shows that currency in circulation has been steadily growing. Section 3 reports on the Reserve Bank’s note processing activity and bank note quality while section 4 takes an in-depth look at counterfeiting activity in New Zealand and the different ways of measuring counterfeiting. Coin issuance and the return of obsolete currency held by the New Zealand public are discussed in section 5, and summarising comments are made in section 6. The appendix at the end of the article describes New Zealand’s outdated currency.

For the Record (PDF 61KB)

Recent discussion papers, news releases and publications from the Reserve Bank of New Zealand

The views expressed are those of individual authors and do not necessarily reflect official positions of the Reserve Bank of New Zealand. Articles published in this Bulletin may not be wholly or substantially reproduced without the permission of the Reserve Bank of New Zealand. Data, brief extracts from articles, and other material appearing in the Bulletin, may be used without restriction provided due acknowledgement is made of the source.