Economics, Econometrics and Finance
4 years ago

New Zealand's Monetary Policy Could Increase Output Volatility by 15%

SSRN Electronic Journal
Monetary Policy and the Volatility of Real Exchange Rates in New Zealand
Kenneth D. West

Paper Summary

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Interest rates can be adjusted to smooth real exchange rate movements in New Zealand, but this may lead to increased volatility in other variables. Decreasing real exchange rate volatility by 25% would require increasing output volatility by 10-15%, inflation volatility by 0-15%, and interest rate volatility by 15-40%.