Unobserved Components Business Cycles for New Zealand. What Are They, and What Might Drive Them?

• Autores: Viv. B. Hall, C. John McDermott
• Localización: Economic record, ISSN 0013-0249, Vol. 87, Nº. 277, 2011, págs. 294-317
• Idioma: inglés
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• Resumen

  • We use unobserved components methodology to establish a New Zealand common cycle from economic activity data for 14 regions, and to assess the extent to which the region-specific cycles are additionally important. We then aggregate the 14 regions to 5 regions, and estimate a similar common cycle. At this level of aggregation, we can assess the statistical significance and relative strengths of influence on the common cycle of monetary and fiscal policy variables and several external shock variables. Our results show that structural breaks associated with New Zealand's major economic policy reforms of the mid-1980s through to the early 1990s play an important role, and that New Zealand's region-specific growth cycles have exhibited considerable diversity. The variance contributions of region-specific cycles dominate common-cycle contributions, a result consistent with multivariate findings for Australasia, but contrary to evidence for the US and for Australian states. We also establish that during key periods, terms of trade and net immigration variables have had distinctive procyclical influences on the common cycle, that real government expenditure has had a modest crowding-out role, and that monetary policy has had no additional significant influence.