What Happens When the Kiwi Flies? The Sectoral Effects of the Exchange Rate Shocks

33 Pages Posted: 20 Nov 2013

See all articles by Özer Karagedikli

Özer Karagedikli

Reserve Bank of New Zealand

Michael Ryan

New Zealand Treasury

Daan Steenkamp

Reserve Bank of New Zealand

Tugrul Vehbi

Government of New Zealand - Treasury

Date Written: November 1, 2013

Abstract

We estimate a Factor Augmented Vector autoregression (FAVAR) to identify idiosyncratic exchange rate shocks and examine the effects of these shocks on different sectors of the economy. We find that an unexpected shock to the exchange rate has significant effects on the tradable sector of the economy. While this is expected, the nontradable sectors of the economy are also influenced by shocks to exchange rate. We argue that one important channel for this influence is the endogenous/cyclical nature of the population dynamics due to permanent and long term migration.

JEL Classification: C22, C32, E21

Suggested Citation

Karagedikli, Ozer and Ryan, Michael and Steenkamp, Daan and Vehbi, Tugrul, What Happens When the Kiwi Flies? The Sectoral Effects of the Exchange Rate Shocks (November 1, 2013). CAMA Working Paper No. 73/2013. Available at SSRN: https://ssrn.com/abstract=2356044 or http://dx.doi.org/10.2139/ssrn.2356044

Ozer Karagedikli

Reserve Bank of New Zealand ( email )

2 The Terrace
P.O. Box 2498
Wellington, 6011
New Zealand
64 4-471-3792 (Phone)
64 4-473-1209 (Fax)

Michael Ryan

New Zealand Treasury ( email )

No. 1, The Terrace
Wellington, 6011
New Zealand

HOME PAGE: http://www.treasury.govt.nz/

Daan Steenkamp

Reserve Bank of New Zealand ( email )

2 The Terrace
P.O. Box 2498
Wellington, 6011
New Zealand

Tugrul Vehbi (Contact Author)

Government of New Zealand - Treasury ( email )

No. 1, The Terrace
Wellington, 6011
New Zealand

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