A Macroeconomic Balance Measure of New Zealand's Equilibrium Exchange Rate

Reserve Bank of New Zealand Working Paper No. DP2000/09

19 Pages Posted: 10 Oct 2002

See all articles by David Hargreaves

David Hargreaves

Government of New Zealand - Department of Economics

Anne-Marie Brook

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: 2000

Abstract

We estimate the fair value of the New Zealand dollar using the macroeconomic balance approach. The model's elasticities are calibrated so that they are more appropriate to a small commodity-exporting economy. Over the 1990s, the model estimates that the fair value for the TWI fluctuated between 52 and 59. For the final quarter of 1999, the model estimates that a TWI of around 56 would have been consistent with macroeconomic balance, implying that the TWI (which was around 54.5) was then approximately at fair value. However, this result is subject to a significant amount of uncertainty.

Suggested Citation

Hargreaves, David and Brook, Anne-Marie, A Macroeconomic Balance Measure of New Zealand's Equilibrium Exchange Rate (2000). Reserve Bank of New Zealand Working Paper No. DP2000/09. Available at SSRN: https://ssrn.com/abstract=320823 or http://dx.doi.org/10.2139/ssrn.320823

David Hargreaves (Contact Author)

Government of New Zealand - Department of Economics ( email )

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

Anne-Marie Brook

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

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