What happens when the Kiwi flies? Sectoral effects of exchange rate shocks on the New Zealand economy

Ozer Karagedikli, Michael Ryan, Daan Steenkamp, Tugrul Vehbi

    Research output: Contribution to journalArticle

    Abstract

    We use a data-rich approach, a factor-augmented vector autoregression (FAVAR), to identify idiosyncratic exchange rate shocks and examine the effects of these shocks on different sectors of the New Zealand economy. We find that an unexpected shock to the exchange rate has significant effects on relatively tradable sectors of the economy. Whilst this is expected, relatively 'more' non-tradable sectors of the economy are also influenced by shocks to the exchange rate, presumably due to their linkages to more trade-exposed sectors. We also find that exchange rate shocks explain a small proportion of overall business cycle variability, implying that the exchange rate acts as a buffer rather than as a source of shock.
    Original languageEnglish
    Pages (from-to)945-959
    JournalEconomic Modelling
    Volume52
    Issue numberPart B
    DOIs
    Publication statusPublished - 2016

    Fingerprint Dive into the research topics of 'What happens when the Kiwi flies? Sectoral effects of exchange rate shocks on the New Zealand economy'. Together they form a unique fingerprint.

    Cite this