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A Test of the Response to a Monetary Policy Regime Change in New Zealand

In: Asia Pacific Financial Markets in Comparative Perspective: Issues and Implications for the 21st Century

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  • David Tripe
  • John McDermott
  • Ben Petro

Abstract

In March 1999, the Reserve Bank of New Zealand changed its method of implementing monetary policy from targeting settlement cash to specifying an (official) Overnight Cash Rate (OCR). This paper explores some of the impacts of this, by comparing market movements before and after the change. We find that, since the introduction of the OCR, key lending interest rates have been found to be more responsive to changes in official monetary policy, with a significant shortening of the half-life of interest rate changes. This suggests that monetary policy is now more efficient, while the speed of response supports the case for regarding the New Zealand banking market as competitive.

Suggested Citation

  • David Tripe & John McDermott & Ben Petro, 2005. "A Test of the Response to a Monetary Policy Regime Change in New Zealand," Contemporary Studies in Economic and Financial Analysis, in: Asia Pacific Financial Markets in Comparative Perspective: Issues and Implications for the 21st Century, pages 453-467, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:csefzz:s1569-3759(05)86019-x
    DOI: 10.1016/S1569-3759(05)86019-X
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    Cited by:

    1. Özer Karagedikli & Rishab Sethi & Christie Smith & Aaron Drew, 2008. "Changes in the transmission mechanism of monetary policy in New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/03, Reserve Bank of New Zealand.
    2. Liu, Ming-Hua & Margaritis, Dimitri & Tourani-Rad, Alireza, 2008. "Monetary policy transparency and pass-through of retail interest rates," Journal of Banking & Finance, Elsevier, vol. 32(4), pages 501-511, April.
    3. Shi, Song & Jou, Jyh-Bang & Tripe, David, 2014. "Can interest rates really control house prices? Effectiveness and implications for macroprudential policy," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 15-28.

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