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Comments on: How to stay hawkish in New Zealand http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/ The Visible Hand in Economics Mon, 22 Sep 2008 02:00:52 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: One thing that worries me about the US economy « The visible hand in economics http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1388 Mon, 22 Sep 2008 02:00:52 +0000 http://tvhe.wordpress.com/?p=364#comment-1388 […] pressure on prices anyway, so the increase in tradable inflation shouldn’t matter (beware the supply shocks though!). Furthermore, the higher price for exports and imports leads to higher export volumes and […]

]]> By: A 75 basis point cut on the cards? « The visible hand in economics http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1387 Thu, 18 Sep 2008 20:22:22 +0000 http://tvhe.wordpress.com/?p=364#comment-1387 […] I’m definitely an inflation hawk.  However, I have no issue with the Reserve Bank cutting interest rates in the face of rising […]

]]> By: New Zealand March 08 GDP « The visible hand in economics http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1386 Fri, 27 Jun 2008 01:34:44 +0000 http://tvhe.wordpress.com/?p=364#comment-1386 […] band. The aggregate supply story that I’ve shown my affection for is still running wild (*) (*) – temporary reversals in growth over the coming quarters and rising […]

]]> By: Discusssions on how to screw up a terms of trade increase « The visible hand in economics http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1385 Fri, 20 Jun 2008 02:12:09 +0000 http://tvhe.wordpress.com/?p=364#comment-1385 […] take for example the case where we have a negative supply shock, such as higher oil prices.  If we assume no change in the optimal set of relative prices, then […]

]]> By: June 08 OCR review and MPS « The visible hand in economics http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1384 Wed, 04 Jun 2008 22:08:28 +0000 http://tvhe.wordpress.com/?p=364#comment-1384 […] market is unfathomable. Add to this the fact that a number of the shocks hitting our growth are temporary supply shocks and such a significant downturn in the labour market seems […]

]]> By: New Zealand Budget 2008: Tax cuts « The visible hand in economics http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1383 Thu, 22 May 2008 03:57:51 +0000 http://tvhe.wordpress.com/?p=364#comment-1383 […] economy is looking increasingly fragile as the result of severe aggregate supply shocks. The total result of this fiscal stimulus now will be to drive inflation over 5% by […]

]]> By: Eric Crampton http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1382 Thu, 15 May 2008 04:42:50 +0000 http://tvhe.wordpress.com/?p=364#comment-1382 To get the effect of WFF properly, you’d need a rather specialized CURF from Stats NZ. Basically, you need to know whether women subject to treatment had a differential labour supply response to women not subject to treatment: so, you need to know family income and number of children as well as individual hours worked. I don’t have that data. Sigh.

]]> By: Matt Nolan http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1380 Mon, 12 May 2008 20:37:17 +0000 http://tvhe.wordpress.com/?p=364#comment-1380 Hi CPW,

Thanks for raising the other side – I don’t really have the time to post the dovish interpretation 😛

It will be interesting to see what happens – but I agree that with the current set of information its damn hard to make a call either way. I also agree that the Reserve Bank will take this as a sign to cut rates.

]]> By: CPW http://www.tvhe.co.nz/2008/05/12/how-to-stay-hawkish-in-new-zealand/#comment-1381 Mon, 12 May 2008 05:33:06 +0000 http://tvhe.wordpress.com/?p=364#comment-1381 I have no technical disagreements Matt. I would note that:
a) the overall terms of trade would suggest a positive supply shock
b) it’s hard to dismiss the possibility that we have just experienced a negative shock to aggregate demand. March quarter consumption and net exports look flat or negative, and business surveys don’t offer much hope for investment. Thank heavens for government spending! 🙂

On female labour force participation: that series has been wobbling around for the last 4 quarters, I don’t see much of a trend. It would be hard to disentangle the WFF effect from the demographics – I’ve seen work suggesting that the lift in female participation was about to come to an end anyway. Also WFF had some positive work incentives for beneficiaries, so the net results were always going to be a little ambiguous.

If (big if) we believe the HLFS i think that rising unemployment and falling employment rates is a convincing sign of an easing labour market and hence evidence in favour of lower interest rates, although I accept the argument that it could be taken as an early indicator of a permanently lower rate of labour force growth (and thus a sign that there is going to be more inflation pressure).

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