Forecasting the New Zealand economy is the main focus of the June 2009 Reserve Bank of New Zealand Bulletin, released today.
The issue opens with an article by Kirdan Lees describing Kiwi Inflation Targeting Technology (KITT), the new Reserve Bank economic model. KITT replaces the decade-old Forecasting and Policy System (FPS) model, and will be an important tool for Reserve Bank forecasting and economic assessment into the future.
KITT is not the only tool available for forecasting. In the second article, Chris Bloor discusses the range of models and approaches the Bank uses to extrapolate the statistical patterns in available economic data.
Another way the Bank obtains information for its economic assessments is through economic indicators. There are thousands of these indicators, covering New Zealand and elsewhere, which demand expert and careful analysis to distil the meaning. In the third article, Tim Aldridge describes how this style of analysis applies to business investment.
In the fourth article, Christina Leung looks in detail at how public views on inflation are formed, discussing demographic evidence about how households consistently over-estimate inflation. The Reserve Bank's inflation analysis depends heavily on understanding how the public expects the economy to develop .
The fifth article, by Lynda Sanderson, considers recent Reserve Bank work analysing the impact of exchange rates on export behaviour.
The Bulletin concludes with an interview with Prasanna Gai on the causes and consequences of the financial crisis. Gai is a Professor at the Australian National University and consultant to the Bank of England, who visited the Reserve Bank in early 2009.
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