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In the absence of a generally accepted indicator of monetary conditions the current and expected stance of monetary policy remains undefined. However, the Reserve Bank of New Zealand, by directly surveying perceived and expected monetary conditions, have enabled both a mean index of current and future monetary conditions, as well as a proxy of respondents’ uncertainty, to be generated. The principal determinants and properties of these survey responses are examined in this paper, including whether: central bank announcements dominate economic fundamentals in determining conditions; the responses are consistent over varying time horizons; and the responses are symmetrical to both a tightening and loosening in policy. The determinants of uncertainty regarding the policy-stance are also investigated empirically. The results indicate that: responses to monetary conditions are highly influenced by the recent past; respondents tend to exaggerate the implications of their short-term ...

Economics --- New Zealand

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Monetary policy -

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In this paper a model is presented and estimated that explains real long-term interest rates in terms of developments in low-frequency and high-frequency economic factors in a multi-country framework, using a data set covering 17 OECD countries since the early-1980s. A simultaneous estimation procedure is adopted (using instrumental variables), with an error correction framework for each country separating the low-frequency fundamental influences on real rates from the higher-frequency short-term dynamics. Parameters of the low-frequency variables are constrained to be equal across countries, which imposes the requirement that they have consistent effects both on behaviour through time and in explaining cross-country interest differentials. The results indicate that the low-frequency component of real rates is determined by fundamentals such as the rate of return on business capital, portfolio risk, inflation uncertainty, and indicators of future saving and investment ...

Economics