Euro Quandaries: Should a Country Exit the Euro Area?
Listener: 13 August, 2005.
Keywords: Macroeconomics & Money;
When an Italian politician proposed that Italy should exit the euro area and return to the lira, specialists just laughed.
Category Archives: Macroeconomics & Money
Amorous or Amiable?
Transtasman banking regulation is a pressure point in our relations with Australia.
Listener: 18 June, 2005
Keywords: Macroeconomics & Money;
More than other overseas investors, banks can quickly withdraw their key assets. The foreign owner of a factory, farm, forest or beach-house can go off in a huff, but the physical entity remains. Financial assets are much more mobile.
Fiscal Management
Finance Minister Michael Cullen faces the political reality of election year
Listener: 23 April, 2005.
Keywords: Macroeconomics & Money;
How to slow an economy that is pressing on its capacity to produce? A couple of decades ago, the government might have imposed a credit squeeze, reducing private investment. Additionally, it would have tightened restrictions of consumer credit (especially hire-purchase), raised taxes to reduce household consumption (but not in election year), reduced government current spending and told government agencies to defer their investment plans. Today, it appears to rely only on the Reserve Bank to squeeze credit by raising interest rates.
Yankee Dollar Blues: How Will the Us Correct Its External Deficit?
Listener: 12 March, 2005.
Keywords: Macroeconomics & Money;
Underneath much of economics is the notion of “homeostasis”, the tendency to respond to an external shock by adjusting internally to maintain equilibrium. So a surge in demand for a product results in its price rising, reducing the amount demanded and increasing the amount supplied.
Fiscal Foolishness
Imbalanced tax cutting is like pouring petrol on a blazing barbecue
Listener 6 November, 2004.
Keywords: Macroeconomics & Money;
With the general election just a year ahead, I have, as usual, reviewed my approach. My strategy is always to help readers try to understand economic issues, rather than tell them which way to vote. Next year I may have to modify it.
Choose a Scenario: How Are We Going to Respond to the Doha Round Gains?
Listener: 25 September, 2005. This economics column was designed to be set out in three parallel columns. That is not possible in this format. Instead final two columns are interleaved, to give a sense of the intended juxtaposition. The italics is used to indicate the different scenarios.
Keywords: Globalisation & Trade; Macroeconomics & Money;
It seems possible that the New Zealand economy could eventually have a three percent boost as a result of the Doha Round’s elimination of dumping agricultural products into key New Zealand export markets. About a third will come from higher export prices, and two-thirds from the additional production – on and off the farm.
For Fear Of Allah
The Koran prohibits interest, so how do Muslims borrow and lend
Listener: 11 September 2004.
Keywords: Macroeconomics & Money;
Launching his Christianity Without God, Lloyd Geering asked me when I would write a book about the economy without money. I said that anthropologist Raymond Firth had already done so (The Economics of the New Zealand Maori), but I would one day write a column about an economy without interest. Lloyd’s eyes twinkled. “Islam?” The Koran states, “Have fear of Allah and give up what remains of what is due to you of usury.”
Dealing with the Monetary Policy Trilemma
Notes for an informal economic discussion
Keywords: Macroeconomics & Money;
While pursuing my primary research interest of globalisation, a recently read paper reminded me of the ‘fundamental’ dilemma of monetary policy of an open economy, also called the ‘trilemma’ or the ‘irreconcilable trinity’.[1]
Don’t Tell Anyone
International experts give New Zealand’s economy the thumbs-up, but the media fail to bring it to public attention.
Listener: 29 May, 2004.
Keywords: Growth & Innovation; Macroeconomics & Money;
A Fulbright New Zealand grant enabled me to visit a number of research colleagues in the US, including the IMF team that visited New Zealand in February. The International Monetary Fund has a programme of annual consultations with its member countries in which the economy and economic management are reviewed. The focus of our Washington meeting was on some mutual research interests, but the team mentioned that their New Zealand review would be published the following day. Early the next morning, I scanned the websites to see what our journalists made of the report.
External Impacts and the NZ Economic Growth Rate
Prepared May 2004, with thanks to Les Oxley.
Keywords: Growth & Innovation; Macroeconomics & Money;
This paper is an econometric successor to my 1997 book In Stormy Seas, and my 2004 lecture The Development of the New Zealand Economy. I pointed out there that post-war New Zealand GDP grew at broadly the same rate as the rest of the OECD except to the extent the export sector experienced changes in profitability indicated by the terms of trade and the real exchange rate.
Currency Appreciation
Trying to make sense of a rising exchange rate.
Listener: 3 April, 2004.
Keywords: Macroeconomics and Money.
The conventional wisdom, like generals, fights the last war. Its complaints about the high exchange rate are from the perspective of the late 1980s. You may recall a few intrepid souls then arguing that the hike in the real exchange rate undermined the profitability of the tradeable sector, which generates foreign exchange by exporting or conserves it by import substitution. The weakened sector would slow overall economic growth, as happened. Meanwhile, the generals, fighting the earlier Muldoon war, ignored the exchange rate, completely failing to predict the poor economic performance.
Recovery and Deficit: Where Is the Us Economy Going?
Listener: 21 February, 2004.
Keywords: Macroeconomics & Money;
Many New Zealanders assumed that when our economy stagnated in the late 1980s and early 1990s, the rest of the world stagnated, too. In fact, it boomed, and New Zealand’s per capita GDP fell from the OECD average to 15 percent below. Similarly, there has been a tendency to assume that there was no world recession in the first few years of the millennium, because New Zealand was hardly affected by it.
Three Short Book Reviews: for the 2003 listener Books Of the Year.
Listener: 20 December 2003.
Keywords: Environment & Resources; Governance; Macroeconomics & Money;
TREASURY: The New Zealand Treasury 1840-2000, by Malcolm McKinnon (AUP, $50).
THE GREAT UNRAVELLING: Losing our way in the new century, by Paul Krugman (Viking, $35).
THE LOST WORLD OF THE MOA: Prehistoric life of New Zealand, by Trevor Worthy and Richard Holdaway (Canterbury University Press, $169.50).
Stressful Fiscal Sums: Should the Government Spend More and Tax Less?
Listener: 13 December, 2003.
Keywords: Macroeconomics & Money;
The history of the modern Treasury –– described in Malcolm McKinnon’s landmark Treasury –– is one of fiscal stress, extreme fiscal stress or intolerable fiscal stress. You might think from the government accounts that is not currently true, for the Treasury reported a “surplus” of $5.6 billion for the year ending June 2003 and promises another comparable one this year. (This surplus’s exact name is “operating balance excluding revaluations and accounting changes” or OBERAC.) For a detailed description of the OBERAC.
Notes on Oberac. the Cash Surplus and Other Measures in the Government Accounts:
This note was written to accompany Stressful Fiscal Sums: Should the Government Spend More and Tax Less? I am grateful for assistance from an economist who for various reasons cannot be named.
Keywords: Macroeconomics & Money;
OBERAC (the operating balance of government excluding revaluations and accounting policy changes) can be looked at as to how it is made up. and what happens to the quantum. The following focuses on the what happens to it. My comments in italics.
Punishing Exports: How Our Monetary Policy Inhibits Growth.
Listener: 20 September, 2003.
Keywords: Growth & Innovation; Macroeconomics & Money;
Remember the teacher who put the whole class into detention because of the misbehaviour of some rowdies at the back? Exporters have a similarly bitter view of the Reserve Bank (RBNZ). It has maintained a high base interest rate (coming down slowly) because the domestic rowdies have been putting inflationary pressure on the economy. Relatively high interest rates affect the rowdy businesses, but also the rest of the economy, especially exporters, because high interest rates tend to push up the exchange rate and reduce the profitability of exporting.
The Exchange Rate (index)
Keywords: Macroeconomics & Money;
A correspondent, R.B. Chrystal, to The Listener asked
Why do we have a floating currency and what advantage is it to the country in general? To me it seems that all it does is allow another tier of parasites, ie currency speculators, into the system as well as create more uncertainty for our exporters. The strength or weakness of our dollar seems to bear very little relationship to the strength or weakness of our economy, as was touted when it was floated.
My answer, published in The Listener of 1 August 2003 is given below. Go to Brian Easton’s response I asked another economist to look at my reply. He thought it fine but also offered his account, which does not address the respondent’s question directly, but gives greater insight into official thinking. Go to another economist’s response <
Deflating News: Just How Sick Is the World Economy
Listener 28 June, 2003.
Keywords: Macroeconomics & Money;
Even the International Monetary Fund is beginning to talk about the possibility of world deflation, that is the general level of prices falling over the medium term. Although the tendency over the last thousand years has been for inflation (rising prices), deflation with slightly falling prices has happened: notably in England during the twelfth and fifteenth centuries, from 1660 to 1730, and during the life of Queen Victoria. There have also been sharp price falls for short periods – most memorably in the 1930’s depression. (My source is David Hackett Fischer’s splendid The Great Wave: Price Revolutions and the Rhythm of History.)
Treat the Kids: Why Michael Cullen Should Blow a Bit Of the Budget Surplus.
Listener 17 May, 2003.
Keywords: Macroeconomics & Money; Social Policy;
One of the political oddities is how American conservatives are keen to blow the US budget surplus, creating an enormous deficit which will substantially adding to the US government’s debt. Under Ronald Reagan the justification was the merits of tax cuts, and the belief the deficit would force the US Congress to cut spending. It didn’t. Under George W. Bush the justification is the merit of tax cuts and need to support a sluggish economy, even though the cuts are poorly designed for macroeconomic stimulus. The commonality is the cutting of the burden of taxation on the rich, in effect switching the burden to future generations.
Crisis: Collapse Of the National Bank Of Fiji
By R. Grynberg, D. Munro & M. White
Listener 26 April, 2003
Keywords: Macroeconomics & Money;
Those involved – including Fijian coup leader and subsequently Prime Minister, Sitiveni Rambuka – were anxious not to have too public the story of the financial crisis of the National Bank of Fiji (NBF). Instead the authors – then academics at the University of Fiji although two have since left – pieced it together from the public record and the investigative reporting of a few courageous journalists. Their story goes like this.