TY  - JOUR
AU  - West,Kenneth D.
TI  - Monetary Policy and the Volatility of Real Exchange Rates in New Zealand
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10280
PY  - 2004
Y2  - February 2004
UR  - http://www.nber.org/papers/w10280
L1  - http://www.nber.org/papers/w10280.pdf
N1  - Author contact info:
Kenneth D. West
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706
Tel: 608/262-0033
Fax: 608/262-2033
E-Mail: kdwest@wisc.edu
AB  - The relationship between interest rates and exchange rates is puzzling and poorly understood. But under some standard assumptions, interest rates can be adjusted to smooth real exchange rate movements at the possible price of increased volatility in other variables. In New Zealand, estimates made under some generous suppositions about what monetary policy is able to accomplish suggest that decreasing real exchange rate volatility by about 25% would require increasing output volatility by about 10-15%, inflation volatility by about 0-15% and interest rate volatility by about 15-40%.
ER  -