Regional Business Cycles in New Zealand: Do They Exist? What Might Drive Them?

Motu Working Paper No. 04-10

40 Pages Posted: 23 Jun 2006

See all articles by Viv Hall

Viv Hall

Victoria University of Wellington - School of Economics & Finance

C. John McDermott

Reserve Bank of New Zealand

Date Written: October 2004

Abstract

We use National Bank of New Zealand Regional Economic Activity data, to identify and characterise classical business cycle turning points, for New Zealand's 14 regions and aggregate New Zealand activity. Using Concordance statistic measures, logistic model and GMM estimation methods, meaningful regional business cycles have been identified and a number of significant associations established. All regions exhibit cyclical asymmetry for both durations and amplitudes, and synchronisations between aggregate NZ activity and each region are contemporaneous. The regional cycles rarely die of old age but are terminated by particular events. The regions most highly synchronised with the NZ activity cycle are Auckland, Canterbury, and Nelson-Marlborough; those least so are Gisborne and Southland. Noticeably strong co-movements are evident for certain regions. Geographical proximity matters, and unusually dry conditions can be associated with cyclical downturns in certain regions. There is no discernable evidence of association with net immigration movements, and no significant evidence of regional cycle movements being associated with real national house price cycles. The agriculture-based nature of the New Zealand economy is highlighted by the strong influence of external economic shocks on rural economic performance. In particular, there is considerable evidence of certain regional cycles being associated with movements in New Zealand's aggregate terms of trade, real prices of milksolids, real dairy land prices and total rural land prices.

Keywords: Classical business cycle, Turning Points, Regional business cycles, Concordance statistics, New Zealand

JEL Classification: C22, E32, R11, R12, R15

Suggested Citation

Hall, Viv and McDermott, C. John, Regional Business Cycles in New Zealand: Do They Exist? What Might Drive Them? (October 2004). Motu Working Paper No. 04-10, Available at SSRN: https://ssrn.com/abstract=910667 or http://dx.doi.org/10.2139/ssrn.910667

Viv Hall (Contact Author)

Victoria University of Wellington - School of Economics & Finance ( email )

P.O. Box 600
Wellington, 6140
New Zealand

HOME PAGE: http://www.vuw.ac.nz/sef/pages/staff/VivHall

C. John McDermott

Reserve Bank of New Zealand ( email )

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

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