The role of antitrust in a small open economy: The Commerce Act in New Zealand

1994 ◽  
Vol 9 (5) ◽  
pp. 671-694 ◽  
Author(s):  
Alan E. Bollard
Keyword(s):  
New Zealand ◽  
Open Economy ◽  
Small Open Economy

scholarly journals Housing and Consumption in New Zealand:  A Financial Accelerator DSGE Model  and SVAR Analysis

2021 ◽  
Author(s):  
◽  
Andrew D Fung
Keyword(s):  
New Zealand ◽  
Housing Market ◽  
Open Economy ◽  
Government Spending ◽  
Negative Impact ◽  
House Prices ◽  
Small Open Economy ◽  
Financial Accelerator ◽  
Dsge Model

<p>This thesis examines the role of a financial accelerator mechanism for housing in the context of a small open economy. Following the seminal financial accelerator framework in a Dynamic Stochastic General Equilibrium (DSGE) model set out by Bernanke, Gertler and Gilchrist (1999) (BGG), Aoki, Proudman and Vlieghe (2002, 2002a, 2004) (APV) examine the role of the financial accelerator for the housing market. In my basic model (Chapter 2), I extend the analysis of APV from a closed economy to a small open economy in which imports are used as intermediate inputs into the production process and foreign demand for domestically produced goods is influenced by the real exchange rate. Unlike APV, I set the endowment of housing to be consistent with the nature of consumer behaviour, in that “rule of thumb” (ROT) consumers (who do not save) are renters, further differentiating them from “permanent income hypothesis” (PIH) consumers. I find that in contrast to APV, the financial accelerator effect does not increase the responsiveness of consumption and output to various shocks. This is due in part to the endowment of housing being restricted to PIH households. I find that the presence of a financial accelerator increases the responsiveness of the housing market to nominal interest rate, technology, and foreign shocks. Moreover, even though the financial accelerator reduces the reaction of the nonhousing variables to shocks, there is still a positive correlation between house prices and consumption, consistent with the widely observed empirical relationship between the two. Furthermore, given that PIH households have access to the capital markets, the model does not rely on a wealth effect to generate this correlation even though homeowners can engage in housing equity withdrawal. In Chapter 3 I extend the DSGE model to include a more fully specified fiscal sector. I find that consistent with the RBC view of fiscal policy, a positive government spending shock has a negative impact on the housing market. Using the type of fiscal rule proposed by Gal´ı, Vall´es and L´opez-Salido (2004), I find that government spending crowds out private consumption, including the purchase of housing services and has a negative impact on house prices. Despite the positive short-term impact on output, tax increases that would ultimately fund the spending shock act as a drag on consumption. In Chapter 4 I examine the New Zealand empirical data in order to see whether a financial accelerator effect can be detected. Using a small seven variable Structural Vector Auto-Regression model I find that shocks to house prices do not have a significant impact on the mortgage rate-benchmark interest rate spread in the manner suggested by the financial accelerator model. This may be due to other costs (such as funding mortgage lending through the international swap market by New Zealand banks) having a significant impact on the setting of mortgage rates and thus the spread. I also find that government spending does not appear to have a significant impact on house prices and the median response is mildly negative - consistent with the result from the DSGE model. Nevertheless, the SVAR does detect a significant relationship between shocks to house prices and household consumption.</p>

scholarly journals Housing and Consumption in New Zealand:  A Financial Accelerator DSGE Model  and SVAR Analysis

2021 ◽  
Author(s):  
◽  
Andrew D Fung
Keyword(s):  
New Zealand ◽  
Housing Market ◽  
Open Economy ◽  
Government Spending ◽  
Negative Impact ◽  
House Prices ◽  
Small Open Economy ◽  
Financial Accelerator ◽  
Dsge Model

<p>This thesis examines the role of a financial accelerator mechanism for housing in the context of a small open economy. Following the seminal financial accelerator framework in a Dynamic Stochastic General Equilibrium (DSGE) model set out by Bernanke, Gertler and Gilchrist (1999) (BGG), Aoki, Proudman and Vlieghe (2002, 2002a, 2004) (APV) examine the role of the financial accelerator for the housing market. In my basic model (Chapter 2), I extend the analysis of APV from a closed economy to a small open economy in which imports are used as intermediate inputs into the production process and foreign demand for domestically produced goods is influenced by the real exchange rate. Unlike APV, I set the endowment of housing to be consistent with the nature of consumer behaviour, in that “rule of thumb” (ROT) consumers (who do not save) are renters, further differentiating them from “permanent income hypothesis” (PIH) consumers. I find that in contrast to APV, the financial accelerator effect does not increase the responsiveness of consumption and output to various shocks. This is due in part to the endowment of housing being restricted to PIH households. I find that the presence of a financial accelerator increases the responsiveness of the housing market to nominal interest rate, technology, and foreign shocks. Moreover, even though the financial accelerator reduces the reaction of the nonhousing variables to shocks, there is still a positive correlation between house prices and consumption, consistent with the widely observed empirical relationship between the two. Furthermore, given that PIH households have access to the capital markets, the model does not rely on a wealth effect to generate this correlation even though homeowners can engage in housing equity withdrawal. In Chapter 3 I extend the DSGE model to include a more fully specified fiscal sector. I find that consistent with the RBC view of fiscal policy, a positive government spending shock has a negative impact on the housing market. Using the type of fiscal rule proposed by Gal´ı, Vall´es and L´opez-Salido (2004), I find that government spending crowds out private consumption, including the purchase of housing services and has a negative impact on house prices. Despite the positive short-term impact on output, tax increases that would ultimately fund the spending shock act as a drag on consumption. In Chapter 4 I examine the New Zealand empirical data in order to see whether a financial accelerator effect can be detected. Using a small seven variable Structural Vector Auto-Regression model I find that shocks to house prices do not have a significant impact on the mortgage rate-benchmark interest rate spread in the manner suggested by the financial accelerator model. This may be due to other costs (such as funding mortgage lending through the international swap market by New Zealand banks) having a significant impact on the setting of mortgage rates and thus the spread. I also find that government spending does not appear to have a significant impact on house prices and the median response is mildly negative - consistent with the result from the DSGE model. Nevertheless, the SVAR does detect a significant relationship between shocks to house prices and household consumption.</p>

scholarly journals Mutual Fund Performance and the Impact of Superannuation and Financial Regulation

2018 ◽  
Author(s):  
James M. Cooper ◽  
Russell Gregory-Allen
Keyword(s):  
New Zealand ◽  
Mutual Funds ◽  
Open Economy ◽  
Mutual Fund ◽  
Financial Regulation ◽  
Positive Impact ◽  
Small Open Economy ◽  
Fund Industry ◽  
Mutual Fund Industry ◽  
The Impact

Financial innovation such as a new superannuation scheme can allow for broader participation in retirement savings by individuals, but might also impact existing investments. On the other hand, mutual fund regulation involves a balancing act between protecting investors, and allowing fund managers to exercise their skills. Some recent changes in the fund environment of New Zealand allows an examination of the impact on performance from those changes in a small, open economy. Using a sample of New Zealand mutual funds, we compared performance before and after the introduction of two significant changes in the financial environment of New Zealand. In 2007, a state-sponsored investment scheme called KiwiSaver was introduced, providing significant incentives for more and more New Zealanders to save. Participation was substantial, and by 2015 KiwiSaver funds under management had exceeded traditional open-end funds. At the time of KiwiSaver’s introduction, mutual fund regulations was quite lax, particularly in the area of financial disclosure. However, in 2013 a new law was introduced, substantially increasing the disclosure requirements for those funds participating in the KiwiSaver scheme. First we examined, the impact on the New Zealand mutual fund industry upon the introduction of KiwiSaver, and then on the introduction of the increased KiwiSaver regulations, in order to determine if these harmed the overall New Zealand mutual fund industry. We found that the New Zealand mutual funds which focused on New Zealand or Australian equities experienced some negative performance after the introduction of KiwiSaver, but the impact on the overall industry was not significant. We also found that the increased regulations had some positive impact on performance, particularly for those funds emphasising global equities.  

scholarly journals Context in international business: Entrepreneurial internationalization from a distant small open economy

2021 ◽  
Author(s):  
Eldrede Kahiya
Keyword(s):  
New Zealand ◽  
Literature Review ◽  
International Business ◽  
Open Economy ◽  
Institutional Environment ◽  
Small Open Economy ◽  
The Other ◽  
Medium Size ◽  
Strategy Process ◽  
Context Shapes

Context matters in International Business, but to what extent does it influence the content of knowledge? This study offers a systematic literature review on the internationalization of New Zealand firms. A geographically isolated small open economy (SMOPEC) with audacious trade aspirations, a strong domestic institutional environment, favorable attitude toward trade, and entrepreneurial small-to-medium size enterprises (SMEs), New Zealand provides an enlightening context to study internationalization. Using a sample of 95 studies, the review identifies antecedents, stimuli, capabilities, strategy, process and outcomes underpinning internationalizing New Zealand firms (INZFs). Context matters but not in the manner anticipated. On one hand research on the internationalization of New Zealand firms is largely congruent with extant knowledge, on the other the New Zealand context shapes uniquely, how and what scholars choose to research.

scholarly journals Interest Rates, Leverage, and Business Cycles in Emerging Economies: The Role of Financial Frictions

2015 ◽  
Vol 7 (3) ◽  
pp. 153-188 ◽  
Author(s):  
Andrés Fernández ◽  
Adam Gulan
Keyword(s):  
Business Cycles ◽  
Interest Rates ◽  
Open Economy ◽  
Emerging Economies ◽  
Financial Frictions ◽  
Small Open Economy ◽  
Financial Data ◽  
Cycle Model ◽  
Business Cycle Model

Countercyclical country interest rates have been shown to be an important characteristic of business cycles in emerging markets. In this paper we provide a microfounded rationale for this pattern by linking interest rate spreads to the dynamics of corporate leverage. For this purpose we embed a financial accelerator into a business cycle model of a small open economy and estimate it on a novel panel dataset for emerging economies that merges macroeconomic and financial data. The model accounts well for the empirically observed countercyclicality of interest rates and leverage, as well as for other stylized facts. (JEL E13, E32, E43, E44, F41, O11)

scholarly journals An Investigation into Rule of Thumb Behaviour in New Zealand

2021 ◽  
Author(s):  
◽  
Adam Malanchak
Keyword(s):  
New Zealand ◽  
Open Economy ◽  
Full Range ◽  
Small Open Economy ◽  
Estimation Procedure ◽  
New Keynesian ◽  
Specification Tests ◽  
Habit Persistence ◽  
Rule Of Thumb ◽  
Mcmc Estimation

<p>In recent times, macroeconomic models have begun to describe aggregate consumer and firm behaviour by allowing some proportion to behave in a rule of thumb manner. This dissertation attempts to address two main issues that are concurrent in the literature. First I test for the proportion of aggregate behaviour that deviates from Classical consumer allocation theory and New Keynesian firm pricing theory in New Zealand. Rule of thumb consumers are assumed to consume out of current income as opposed to obeying the Permanent Income Hypothesis, while rule of thumb firms set prices in a backward looking manner. Using the GMM estimation procedure, I examine the sensitivity of estimates across a range of instrumental variables. After positive GMM specification tests I find the proportion of rule of thumb consumers is 0.21 and the proportion of backward looking price setters is 0.82. These results suggest that specifications which fail to allow for rule of thumb behaviour cannot fully reflect consumer and firm decisions. The second main issue seeks to address how these estimates compare to those estimated in a small open economy DSGE model. Monte Carlo Markov Chain (MCMC) estimation finds an estimated degree of external habit persistence of 0.9, proportion of rule of thumb consumers of 0.34, and the proportion of backward looking price setters falls to 0.7. A full range of MCMC diagnostics is subsequently computed. The diagnostic tests are largely favourable.</p>

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