Modelling for monetary policy: the New Zealand experience
This article is an edited version of a paper written for the Centre of Central Banking Studies’ Chief Economists Workshop in London in May 2006. The article reviews the evolution of modelling at the Reserve Bank of New Zealand from the 1970s to today, focusing on the changing role of inflation expectations. It discusses the impact of theoretical developments on the evolving approach to monetary policy and the models that have been built to support policy. The article highlights the important impact that the Lucas critique has had on both monetary policy, and the Bank’s approach to modelling.