Listener 20 September, 1997.

Keywords: Macroeconomics & Money;

When a decade ago this columnist talked about the Reserve Bank of New Zealand (RBNZ) “quasi-targeting” on the exchange rate, the conventional wisdom said that this was a nonsense. Over the years that quasi-targeting became increasingly explicit, as illustrated by the RBNZ’s Monetary Conditions Index. The MCI, as it is known, combines a short term interest rate and the exchange rate (measured by a trade weighted index – the TWI), to give a quantitative indicator of the RBNZ’s assessment of monetary conditions. The RBNZ even sets a range in which the MCI should hover. As I write the index is meant to be between 775 and 875, although it is likely to be changed with the new monetary policy announcement by the RBNZ, this Thursday (18th).

Those Magic Moments … Budgeting At Three O’Clock in the Morning
Listener 26 July, 1997

Keywords: Macroeconomics & Money;

Listener28 June, 1997.

Keywords: Macroeconomics & Money;

The economy seems to have been in a growth slowdown. It is not easy to tell its current state because the data is incomplete. But as best can be judged, the upswing phase of the business cycle following the long recession of the late 1980s is over, and the economy is now expanding at a modest rate. The upswing was heralded by ideologues as a permanent and sustainable. The more cautious commentators recognised that this was a cyclical recovery, and economic growth would then slow down. It has. What does that tell us about the long term prospects of the economy?

Australia’s Experience of A High External Deficit Has Relevance Here.
Listener: 1 March, 1997.

Keywords: Macroeconomics & Money;

John Edwards, adviser to the Paul Keating when he was Australian Treasurer and Prime Minister, is far too uncritical of his former boss to make his Keating: The Inside Story a great biography. But if the book lacks insight into Keating’s persona, Edwards – an economist and currently Chief Economist for Société Générale in Sydney – provides a fascinating account of the economic policy making.

One Recent Economics Publication Offers Diversity, Another Ideology.
Listener: 15 February, 1997.

Keywords: Macroeconomics & Money;

Over the years I have collected a bibliography of about 500 books and article on the economic reforms since 1984, reflecting numerous accounts of what happened. It is not comprehensive – simply the items I have referred to in my writings. By a judicious selection one can select a subset of these references which demonstrates the muldoonist analysis of the reforms was correct, or a marxist one, or a crude keynesian, or a social credit one, or whatever. You would not have to do that for a new right account of the reforms. Instead you would go to a recent article “Economic Reform in New Zealand 1984-95: The Pursuit of Efficiency” by Lewis Evans, Arthur Grimes, David Teece, and Bryce Wilkinson, published in the Journal of Economic Literature.

The Cook Islands is in Crisis – its Economy Awaits Major Structural Change
Listener 2 November, 1996.

Keywords: Macroeconomics & Money

While “hitting the wall” is a phrase beloved by politicians and journalists, it is not a rigorous notion. If it means a crisis which is so drastic that there had to be major policy change, New Zealand did not hit the wall in 1984. There was a currency crisis, in which some people panicked, while others magnified it out of proportion to justify their policies and their grab for power. However the Cook Islands has not just had a currency crisis. It is facing the need for major structural change. Their economy might be said to be hitting the wall. In comparison, New Zealand’s was the bump of a dogem.

Should the Governor of the Reserve Bank Be Elected, Or is the Bank Just A Tool of Parliament?
Listener: 21 September, 1996.

Keywords: Macroeconomics & Money;

Would you rather be voting for the Governor of the Reserve Bank than the parliament? A yes probably rests on the belief that the governor is more powerful than the prime minister. Irrespective of whether he is, his power comes from parliament, and he or she is but a eunuch without parliament’s command.

There Has Not Been A Balance of Payments Crisis for Over A Decade. Will Our Luck Run Out?
Listener: 6 April, 1996.

Keywords: Macroeconomics & Money;

It is that time in the economic cycle when the more experienced economists begin muttering “balance of payments crisis”, albeit with a question mark. Such crises occur when the current revenue the country obtains overseas (mainly from exports) is much less than the current payments the country makes (for imports and foreign debt servicing) to the extent that foreigners are no longer willing to lend sufficient capital to cover the deficit.

Do We Need A Reserve Bank in New Zealand?
Listener: 10 February 1996

Keywords: Macroeconomics & Money;

The inability of the American government to manage its budget is notorious. In the early 1980s the Reagan administration and the US parliament cut taxes, raise military spending, and end up with a huge government deficit. As I write, over a decade later their successors, Bill Clinton and Congress led by Newt Gringrich, are still struggling with that heritage hoping to eliminate the deficit in another seven years. While the deficit stimulated the US (and world) economy during the 1980s, the rising debt as a proportion of GDP, poses a threat to the viability of the US and world economy. The President and the Congress know this, but they have not be very good at doing anything about it.

Listener: 19 August, 1995.

Keywords: Macroeconomics & Money;

The proposal for “parity parties” when the New Zealand dollar equals the Australian dollar in market value is typical of the bizarre economic thinking by some in the financial sector. The last time parity was attained was in November 1967. Since then consumer prices have risen 12.8 times (i.e. 1180 percent) in New Zealand, while they have risen 8.1 times in Australia. While the consumer price index is not a perfect measure of inflation, the gap between our price levels remains substantial. An OECD study in 1990 found the New Zealand dollar could buy the same as 86 Australia cents. Allowing for the differential inflation rates since the figure is probably about 88 cents today.

How Does the State of Major Economies Affect Us?

Listener: 5 August, 1995.

Keywords: Macroeconomics & Money;

The world economy is not in robust state. Some of leading commentators are muttering about the fragility of the Japanese economy and stagnation in the US one. There is usually one major economy which is worrying, but my concerns here are more about the fundamentals, most notably the very high world real interest rates.

Is the Reserve Bank Act Being Undermined by Incompetence?

Listener: 29 April, 1995.

Keywords: Macroeconomics & Money;

Is the Business Cycle a Necessity or Nuisance?    Listener: 15 April, 1995.    Keywords: Macroeconomics & Money;    A recent editorial in the London Economist mused on the death of the business cycle. Economists have been able to track cycles of upswings and downswings for over two centuries. The fluctuations are not a precise…
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Inflation Fighters Need To Define Their Target

Listener: 4 March 1995

Keywords: Macroeconomics & Money;

The debate about whether inflation is the appropriate target of monetary policy is bedeviled by there being no rigorous definition of inflation. When most prices are increasing at 20 percent a year, there is no trouble at saying that there is inflation. But when some prices are increasing at 2 percent, some at 4 percent, and some are declining, the issue of whether the economy is inflating is much more equivocal. A price change index can be defined to be the rate of inflation for practical purposes, but that is not the same thing as a rigorous definition. If one practical purpose differs from another, the index becomes less relevant.

Listener: 7 January, 1995.

Keywords: Macroeconomics & Money;

The new emperor, a decent man, was sad. His country was not doing well. True, most people who wanted them had jobs, and most people seemed well fed, and clothed. But he also wanted his country to be great and strong.

Listener19 November 1994, republished in Inflation: A Sixth Form Resource, Reserve Bank of New Zealand).

Keywords: Macroeconomics & Money; Statistics;

The Reserve Bank Act requires the Bank to attain and maintain price stability, but it does not define “price stability”. Practically that is defined in the Policy Targets Agreement (PTA) between the Minister of Finance and its Governor. Currently the PTA requires monetary policy to be managed so that the Consumer Price Index (CPI), with modifications discussed below, remains in a 0 to 2 percent p.a. range.