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

Format:

Book

Author/Creator:

West, Kenneth D.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10280.

NBER working paper series no. w10280

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

The relationship between interest rates and exchange rates is puzzling and poorly understood. But under some standard assumptions, interest rates can be adjusted to smooth real exchange rate movements at the possible price of increased volatility in other variables. In New Zealand, estimates made under some generous suppositions about what monetary policy is able to accomplish suggest that decreasing real exchange rate volatility by about 25% would require increasing output volatility by about 10-15%, inflation volatility by about 0-15% and interest rate volatility by about 15-40%.

Notes:

Print version record

February 2004.