Exchange rate puzzle in New Zealand: New evidence
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This paper adopts an event-study approach that utilises a combinationof the asset pricing model of the exchange rate due to Engel and West(2010) and a state space model to examine the impact of monetarypolicy shocks on the change of the New Zealand exchange rate. Wefind evidence to support the “exchange rate puzzle” (ERP) originallycoined by Grilli and Roubini (1995). The ERP in the New Zealandcontext was also found in Wilkinson et al. (2001). Using newer data,the present study is able to account for the role of the recent globalfinancial crisis (GFC) in influencing the nexus between the exchangerate and interest rate. It is found that the GFC had a mediating effecton the ERP, showing the exchange rate responded asymmetrically tomonetary policy shocks.
Abstract
This paper adopts an event-study approach that utilises a combinationof the asset pricing model of the exchange rate due to Engel and West(2010) and a state space model to examine the impact of monetarypolicy shocks on the change of the New Zealand exchange rate. Wefind evidence to support the “exchange rate puzzle” (ERP) originallycoined by Grilli and Roubini (1995). The ERP in the New Zealandcontext was also found in Wilkinson et al. (2001). Using newer data,the present study is able to account for the role of the recent globalfinancial crisis (GFC) in influencing the nexus between the exchangerate and interest rate. It is found that the GFC had a mediating effecton the ERP, showing the exchange rate responded asymmetrically tomonetary policy shocks.
참고문헌 (31)
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