The Treasury today published a working paper which deciphers the evidence of how volatile and variable the New Zealand dollar has been compared with the currencies of a number of other relevant economies and examines what drives the New Zealand exchange rate over different time horizons.
The paper finds that New Zealand does have large exchange rate cycles, but that this is also the case for several other relevant economies. Short-term exchange rate volatility is also found to be high in New Zealand, similar to the degree of exchange rate volatility experienced in both Australia and in Japan.
The working paper, New Zealand's Exchange Rate Cycles: Evidence and Drivers identifies the major global and domestic factors influencing New Zealand dollar cycles, including relative returns such as interest rate differentials.
The findings of this research raise important issues that will be explored in a forthcoming working paper, New Zealand's Exchange Rate Cycles: Impacts and Policy, due to be published in early 2011.
Contact for Enquiries[Chris Ritchie | Senior Communications Advisor]
[Tel: +64 4 917 6268]