Reserve Bank of New Zealand Bulletin articles
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June 2009 (Vol. 72, no 2)
Download the complete issue of the June 2009 Bulletin (PDF 1MB)
Articles
Editor’s Note (PDF 236KB)
Introducing KITT: The Reserve Bank of New Zealand new DSGE model for forecasting and policy design (322KB)
The Reserve Bank of New Zealand has developed a new core macroeconomic model to replace the existing FPS (Forecasting and Policy System) model. KITT (Kiwi Inflation Targeting Technology), the new model, advances our modelling towards the frontier in terms of both theory and empirics. KITT reconfirms the Reserve Bank’s commitment to having a theoretically well-founded model at the heart of the monetary policy process. This article provides context about the reasons for the move to the new model, and an overview of the model itself. KITT builds a rich picture of the macroeconomic economy from specific assumptions about the microeconomic behaviour of households and firms that interact in several goods markets. The article illustrates the structure of the model, how this structure determines the way in which shocks or unexpected events propagate through the economy, and the role of the model in the forecast process.
The use of statistical forecasting models at the Reserve Bank of New Zealand (PDF 295KB)
Economic forecasts, in particular the forecasts for inflation, are an important part of the monetary policy formulation process at the Reserve Bank. The forecasts from a range of statistical models provide an important cross check for the forecasts produced by the main policy model that supports the policy deliberation process. This article describes the suite of statistical models used at the Reserve Bank and how these models fit into the forecasting process.
The Reserve Bank’s process for forecasting business investment (PDF 208KB)
The Reserve Bank pays close attention to trends in business investment, due to its importance in contributing to inflationary pressure and the economy’s long-run productive capacity. This article discusses the components of business investment, and how the Reserve Bank forecasts them.
The demographics of household inflation perceptions and expectations (PDF 327KB)
The Reserve Bank is interested in households’ inflation expectations, as they can provide useful insight into how inflation pressures have evolved in the economy. The Marketscope survey of household inflation expectations suggests that households consistently over-predict inflation. This article uses the Marketscope survey unit record data to find the possible drivers of the average level of over-prediction in household inflation expectations. Gaining a better understanding of how various demographic groups participate (or not, as the case may be) in the survey, and their different perceptions of inflation, enables the Reserve Bank to obtain a more accurate read of households’ true inflation perceptions. It discusses ways in which the Reserve Bank can improve households’ understanding of inflation developments in the economy.
Exchange rates and export performance: evidence from micro-data (PDF 171KB)
This article presents a summary of early results from an ongoing Reserve Bank research programme on the impact of exchange rates on firm-level export behaviour. Understanding responses to exchange rate movements at the level of individual firms is key to a deeper understanding of the channels through which economic and policy changes are transmitted through the economy. Results suggest that New Zealand firms have limited ability to respond to exchange rate changes through price-setting. Rather, explicit hedging is common and firms’ trade behaviour reflects a desire to avoid the risk associated with exchange rate volatility.
The evaporation of trust: Prasanna Gai on financial crises (PDF 140KB)
Prasanna Gai is a Professor at the Australian National University and a consultant to the Bank of England, where he haspreviously worked on financial stability matters. Prasanna visited the Reserve Bank early in 2009. In this interview, he talks about the current financial crisis and the challenges it poses for policy makers and academic economists.
For the Record (PDF 86KB)
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.
