Survey Expectations of Monetary Conditions in New Zealand: Determinants and Implications for the Transmission of Policy

Reserve Bank of New Zealand Working Paper No. G99/6

22 Pages Posted: 21 Jul 2003

See all articles by Leo Bonato

Leo Bonato

International Monetary Fund (IMF)

Robert St. Clair

Monetary Authority of Singapore

Rainer Winkelmann

University of Zurich - Statistics and Empirical Economic Research; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR)

Date Written: 1999

Abstract

In this paper, we use a unique database on expected monetary conditions from the Reserve Bank of New Zealand Survey of Expectations to study how policy signals are transmitted. In order to exploit the ordinal nature of the data, we run an ordered probit model where expected monetary conditions are a function of expected financial market variables and some "narrative" measures of monetary policy shocks. Although conclusions about the impact of policy shocks on public's expectations are somewhat tentative, the results could be interpreted as evidence of "divergence" between the Reserve Bank's and the public's view. Overall, the paper shows that surveyed expectations contain valuable information on the transmission of monetary policy. On average, respondents place more weight on the interest rate than on the exchange rate, and particularly so in sectors that are less exposed to international trade. Moreover, the relative weights vary substantially over time as different shocks hit the economy. We test for the presence of regime shifts in expectations due to changes to either the institutional framework or the implementation system. We find a significant effect of the introduction of the Reserve Bank Act in 1989.

Suggested Citation

Bonato, Leo and St. Clair, Robert and Winkelmann, Rainer, Survey Expectations of Monetary Conditions in New Zealand: Determinants and Implications for the Transmission of Policy (1999). Reserve Bank of New Zealand Working Paper No. G99/6, Available at SSRN: https://ssrn.com/abstract=321384 or http://dx.doi.org/10.2139/ssrn.321384

Leo Bonato

International Monetary Fund (IMF) ( email )

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Robert St. Clair (Contact Author)

Monetary Authority of Singapore ( email )

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Singapore, 079117

Rainer Winkelmann

University of Zurich - Statistics and Empirical Economic Research ( email )

Raemistrasse 62
CH-8001 Zurich
Switzerland
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HOME PAGE: http://www.unizh.ch/sts/

IZA Institute of Labor Economics ( email )

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Bonn, D-53072
Germany
+49 228 3894 503 (Phone)
+49 228 3894 510 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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