Abstract

http://ssrn.com/abstract=495786
 
 

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Monetary Policy and the Volatility of Real Exchange Rates in New Zealand


Kenneth D. West


University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

February 2004

NBER Working Paper No. w10280

Abstract:     
The relationship between interest rates and exchange rates is puzzling and poorly understood. But under some standard assumptions, interest rates can be adjusted to smooth real exchange rate movements at the possible price of increased volatility in other variables. In New Zealand, estimates made under some generous suppositions about what monetary policy is able to accomplish suggest that decreasing real exchange rate volatility by about 25% would require increasing output volatility by about 10-15%, inflation volatility by about 0-15% and interest rate volatility by about 15-40%.

Number of Pages in PDF File: 32

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Date posted: February 1, 2004  

Suggested Citation

West, Kenneth D., Monetary Policy and the Volatility of Real Exchange Rates in New Zealand (February 2004). NBER Working Paper No. w10280. Available at SSRN: http://ssrn.com/abstract=495786

Contact Information

Kenneth D. West (Contact Author)
University of Wisconsin - Madison - Department of Economics ( email )
1180 Observatory Drive
Madison, WI 53706
United States
608-262-0033 (Phone)
608-262-2033 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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