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December 2004 Reserve Bank Bulletin released

December 2004 Reserve Bank Bulletin released

The Reserve Bank today released the December 2004 issue of the Reserve Bank of New Zealand Bulletin. An article in this issue reports on recent work examining foreign exchange hedging practices by New Zealand exporters and importers. This work involved interviewing bank staff and business executives, reviewing data sources and previous studies, and undertaking simulations to estimate the effect of hedging on exporters' and importers' incomes.

A key finding is that hedging has had a significant smoothing impact on export sector incomes over recent times. This finding may help to explain why many exporting businesses appear to have coped relatively well as the New Zealand dollar has risen.

A second article provides a comprehensive discussion of the Bank's liquidity management function and describes the tools currently used to carry it out. Liquidity management plays an important role in helping to maintain the stability of the banking system and in supporting monetary policy. There have been subtle changes to the framework in recent years and the article should serve as an up-to-date reference.

A third article explains how the Bank constructs its 12 region index of GDP, which the Bank uses as a proxy for demand by New Zealand's main trading partners. This index is regularly reported in the Bank's Monetary Policy Statements.

The December issue also includes two speeches recently given by the Governor and Deputy Governor of the Reserve Bank - one on banking supervision and the other on the level of household indebtedness.

Finally, this issue contains a brief note on the "New Zealand CPI Calculator" which was released on the Bank's website ( last year. The calculator has been expanded and is now capable of providing estimates of purchasing power as far back as 1862.

You can read the December issue on the Bank's website at

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