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This paper surveys the evolution of macroeconomic policy, in the New Zealand context, from the beginning of the end of the Great Inflation of the 1970s/1980s, through to the current recovery from the Great Recession brought on by the Global Financial Crisis. The 30 or so years since the late 1970s is divided into four periods: the run-up to the mid-1984 currency crisis; the period of reform from that point until the early 1990s; the subsequent extended period of non-inflationary growth in the 1990s and into the 2000s (punctuated by the Asian Financial Crisis in 1997/98); and the GFC and the years since. The paper reviews macroeconomic policy and developments across each of these periods in relation to fiscal policy, monetary policy, exchange rate policy and prudential supervision, all of which at various times have been used with macroeconomic objectives in mind. The paper concludes with some observations on where macro policy appears to be headed, suggesting that is towards achieving some re-integration of its individual components.
I thank Michael Reddell, Gary Hawke, Dennis Rose, and Talo Talosaga for their helpful review of, and comments on, an earlier draft of this paper, whilst remaining solely responsible for all the views and conclusions expressed, as well as for any omissions and errors that remain.
The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author(s). They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.
Table of Contents
- Executive Summary
- 1 Introduction
- 2 The run-up to 1984
- 3 Macroeconomic reform: 1984 to the early 1990s
- 4 The Great Moderation: From the early 1990s to the GFC
- 5 From the GFC to the present
- 6 Some concluding observations: Putting macroeconomic policy back together again
- Statistical Annex