Global Shocks, Economic Growth and Financial Crises: 120 Years of New Zealand Experience

42 Pages Posted: 4 Jun 2010 Last revised: 9 Jun 2010

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

David Hargreaves

Government of New Zealand - Department of Economics

Mizuho Kida

World Bank

Date Written: May 2010

Abstract

We identify the timing of currency, banking crises and sudden stops in New Zealand from 1880 to 2008, and consider the extent to which empirical models can explain New Zealand's crisis history. We find that the cross country evidence on the determinants of crises fits New Zealand experience reasonably well. A number of the risk factors that correlate with crises internationally-such as domestic imbalances, external debt, and currency mismatches-were elevated for New Zealand when the country had more frequent crises and have improved in the recent (more stable) period. However, a time-series analysis of New Zealand growth over 120 years shows that global factors-such as the US growth rate and terms of trade-explain New Zealand growth fairly well, and that crisis dummy variables do not have significant additional explanatory power. This suggests that having sound institutions and policies may help avoid severe domestic crises, but will not be sufficient to avoid the domestic economic impact of the global business cycle.

Suggested Citation

Bordo, Michael D. and Hargreaves, David and Kida, Mizuho, Global Shocks, Economic Growth and Financial Crises: 120 Years of New Zealand Experience (May 2010). NBER Working Paper No. w16027. Available at SSRN: https://ssrn.com/abstract=1612619

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David Hargreaves

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
Wellington
New Zealand

Mizuho Kida

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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