Monetary Policy Of New Zealand

3004 Words Nov 22nd, 2014 13 Pages
In this report, I will analyse Monetary Policy (MP) reforms of New Zealand (NZ) from 1996-2013, in order to establish a link between MP and economic growth performance. My motivation for choosing NZ for my report is the fact that NZ was the first country to adopt inflation targeting, formally in 1990, thus it is my goal to establish how effective this has been in contributing to economic growth performance. I will also be reviewing the MP background of NZ and NZ’s MP History from 2001-2013, a few years after they adopted the OCR as an instrument for implementing MP and its impact on economic growth. Furthermore, I will review NZ MP Reforms and some general Macro economic trends.
Finally I will link NZ’s MP reforms to its economic growth by looking at some years of decline in growth and the reforms that were taken to aid in recovery. I will also try to establish if monetisation occurred in the years under review.
My conclusion outlines my findings of the effectiveness of MP in impacting recovery in economic growth, keeping inflation in check as well as stabilisation.

Monetary Policy Background of New Zealand
The primary objective of the Reserve Bank of NZ (RBNZ) is to maintain price stability. In recent years, there has been a shift from multiple targets of MP, under political control, to a single target, which is inflation control. During the 1990’s (NZ) shifted to a new policy regime, where inflation was forecasted and a target was set for the forecast. The Government of…
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