Reserve Bank Discussion Papers
The following Discussion Paper has been released on the Reserve Bank's website. The discussion papers are available at http://www.rbnz.govt.nz/research/discusspapers/
Global shocks, economic growth and financial crises - 120 years of New Zealand experience
By Michael D. Bordo, David Hargreaves, and Mizuho Kida, December 2009 (401KB)
We identify the timing of currency, banking crises and sudden stops in New Zealand from 1880 to 2008 using methodologies from the international literature and consider the extent to which the empirical models in that literature can explain New Zealand’s crisis history. We find that the cross country evidence on the determinants of crises fits New Zealand experience reasonably well. A number of the risk factors that correlate with crises internationally – such as domestic imbalances, external debt, and currency mismatches – were elevated for New Zealand when the country had more frequent crises and have improved in the recent (more stable) period. However, a time-series analysis of New Zealand growth over 120 years shows that global factors – such as the US growth rate and terms of trade –explain New Zealand growth fairly well, and that crisis dummy variables do not have significant additional explanatory power. This suggests that having sound institutions and policies may help avoid severe domestic crises, but will not be sufficient to avoid the domestic economic impact of the global business cycle.
Forecasting New Zealand's economic growth using yield curve information
By Leo Krippner, and Leif Anders Thorsrud, November 2009 (PDF 808KB)
We forecast economic growth in New Zealand using yield curve data within simple statistical models; i.e. typical OLS relationships that have been well-established for other countries, and related VAR specifications. We find that the yield curve data has significant forecasting power in absolute terms and performs well relative to various benchmarks. Specifications including measures of the yield curve slope produce the best forecasts overall. Our results also highlight the benefits of fully exploiting the timeliness of yield curve information (i.e it is always available and up to date).
Whatever next? Export market choices of New Zealand firms
By Richard Fabling, Arthur Grimes, and Lynda Sanderson, December 2009 (PDF 338KB)
We examine product and market entry choices of New Zealand exporters, using an enterprise level dataset which links firm performance measures with detailed data on merchandise trade. We focus our enquiry not on the broad question of what determines a firm's ability to export, but on the subsequent question: given that a firm has the ability to export, what determines the choices they make about what and where to export? We simultaneously consider firm and market level determinants of export market entry. At the firm level we find that measures of general and specific prior trade experience play an important role in determining the firm's future export activities. That is, we find evidence of path dependence within firms. We also find evidence of path dependence across firms, with entry into new export relationships reflecting demonstration effects from the export activities of other firms in the local area. These results are robust to the inclusion of other determinants of exporting, including the macroeconomic performance of destination countries, exchange rate movements, and the past performance of the exporting firm.
Measuring Changes in Firm-Level Volatility – An Application to Japan
By Emmanuel De Veirman and Andrew Levin, December 2009 (PDF 247KB)
This paper develops a new technique for estimating earnings and employment volatility at the firm level, and applies it to Japanese firms. Unlike earlier studies for the United States, we estimate instantaneous volatility for every year, rather than a rolling ten-year average of volatility. In addition, our technique allows us to estimate the firm-specific component of firm volatility separately, by controlling for variation in firms’ earnings and employment growth induced by aggregate and sectoral factors. We find that firm-specific sales volatility was substantially higher before the 1990 stock market crash than in the following fifteen years. The conditional variance of earnings and employment growth stayed relatively constant until the late 1990s, but increased substantially from 1999 onwards.