An open macroeconometric model for New Zealand: structure, estimation, policy and simulation results based on rational expectations

Abstract

The thesis is generally concerned with a particular structural macroeconometric model for New Zealand's economy, and organised around the four main themes, Facts, Theories, Testing Theories and Poliey Analysis. The scope is to explain theoretical and empirical levels of the individual equations of the macroeconomic system, and the interrelationship of the main macroeconomic variables, including output, inflation, interest rate, exchange rate, budget deficit and private sector wealth, etc. The model is an open small macroeconometric model of the New Zealand economy and has been designed for policy analysis. The dynamic response to a fiscal and monetary policy and external shocks such as change of world trade, price of oil as well as foreign interest rates are studied using empirical model which embodies current account and rational expectations in financial market and perfect capital mobility as well. However, the domestic adjustment of the economy from one steady state to the other is affected by the way of that government finances its deficit, that is, monetary or debt targets, and the expectations formation in the foreign exchange market and inflation rates.