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Kiwi drivers the New Zealand dollar experience

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On 1 August 2011 the Reserve Bank s trade-weighted exchange rate index (TWI) rose to 75. The only previous time that this level was reached since the exchange rate was floated in 1985 was in July 2007. On both of these occasions, the high level of the TWI was matched by the ANZ commodity price index, which itself reached levels not seen in 30 years. The close timing of these peaks was almost certainly no coincidence. In this paper, we quantify this relationship and consider its importance for explaining the New Zealand dollar over the past 25 years relative to the many other influences, such as housing cycles and interest rate differentials.

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  • Chris McDonald, 2012. "Kiwi drivers the New Zealand dollar experience," Reserve Bank of New Zealand Analytical Notes series AN2012/02, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbans:2012/02
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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Analytical%20notes/2012/an2012-2.pdf
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    1. Enzo Cassino & Zoe Wallis, 2010. "The New Zealand dollar through the global financial crisis," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 73, pages 20-30, September.
    2. Anella Munro, 2004. "What drives the New Zealand dollar?," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, june.
    3. Anne-Marie Brook & David Hargreaves, 2000. "A macroeconomic balance measure of New Zealand's equilibrium exchange rate," Reserve Bank of New Zealand Discussion Paper Series DP2000/09, Reserve Bank of New Zealand.
    4. Alfred A. Haug & Christie Smith, 2012. "Local Linear Impulse Responses for a Small Open Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(3), pages 470-492, June.
    5. Bloor, Chris & Matheson, Troy, 2011. "Real-time conditional forecasts with Bayesian VARs: An application to New Zealand," The North American Journal of Economics and Finance, Elsevier, vol. 22(1), pages 26-42, January.
    6. Mr. Kenneth Rogoff & Mr. Yu-chin Chen, 2002. "Commodity Currencies and Empirical Exchange Rate Puzzles," IMF Working Papers 2002/027, International Monetary Fund.
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    Cited by:

    1. Miles Parker & Benjamin Wong, 2014. "Exchange rate and commodity price pass‐through in New Zealand," Reserve Bank of New Zealand Analytical Notes series AN2014/01, Reserve Bank of New Zealand.
    2. Daan Steenkamp, 2014. "Structural adjustment in New Zealand since the commodity boom," Reserve Bank of New Zealand Analytical Notes series AN2014/02, Reserve Bank of New Zealand.

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