Stabilization bias for a small open economy: The case of New Zealand

Philip Liu

    Research output: Contribution to journalArticle

    Abstract

    Using a fully specified DSGE model, this paper investigates the relationship between a central bank's policy objectives and the stabilization bias. The model is estimated using data from New Zealand. Results indicate that the size of the stabilization bias is nearly twice as large for a small open economy relative to that of closed economies. The results also indicate that the size of the stabilization bias is increasing with respect to the policymaker's preference for exchange rate stabilization.
    Original languageEnglish
    Pages (from-to)921-935
    JournalJournal of Macroeconomics
    Volume32
    Issue number3
    DOIs
    Publication statusPublished - 2010

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