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Comments on: High dollar is a symptom, not a cause http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/ The Visible Hand in Economics Tue, 11 Aug 2009 23:20:33 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: TVHE » More on exchange rate targeting http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20950 Tue, 11 Aug 2009 23:20:33 +0000 http://www.tvhe.co.nz/?p=4172#comment-20950 […] has implied, and BERL has stated, that there is some role for exchange rate management.  Although I do not agree, some recent academic work has come down on their side (ht […]

]]> By: TVHE » More commentators on the NZ dollar http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20906 Mon, 10 Aug 2009 02:02:45 +0000 http://www.tvhe.co.nz/?p=4172#comment-20906 […] mentioned here earlier, the high NZ dollar is a symptom of domestic imbalances not a cause – so instead of looking at intervening in the dollar we should be trying to […]

]]> By: TVHE » Is milk implying that the dollar isn’t “too high” http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20803 Tue, 04 Aug 2009 22:16:52 +0000 http://www.tvhe.co.nz/?p=4172#comment-20803 […] If the dollar incorporates correct expectations of milk price increases like this then I don’t think we should be banging on about it being “too high” (Not that I think we should bang on about it in the first place). […]

]]> By: TVHE » RBNZ on “sustainable” growth http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20723 Mon, 03 Aug 2009 01:05:10 +0000 http://www.tvhe.co.nz/?p=4172#comment-20723 […] even if it doesn’t seem justifiable we should recognise that it is a symptom of the imbalances, not the fundamental cause.  If our dollar is “too high” we need to ask what […]

]]> By: Rohit http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20718 Sun, 02 Aug 2009 09:15:57 +0000 http://www.tvhe.co.nz/?p=4172#comment-20718 I really doubt that the Reserve Bank does really have anything in its own Hands. If it really does, then why is it acting as a slave?

]]> By: hampers http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20715 Sun, 02 Aug 2009 01:23:52 +0000 http://www.tvhe.co.nz/?p=4172#comment-20715 Meaning to say, they were only manipulating the dollar? If they like it up, they can make it. If they want to put it down, by all means they can. Oh what a pity. NZ is good in helping their constituents uplift their means of livelihood. This should be emulated by other countries.

]]> By: seo2z http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20706 Fri, 31 Jul 2009 12:07:50 +0000 http://www.tvhe.co.nz/?p=4172#comment-20706 Here’s another sure-fire way to get the dollar down: nationalise Telecom. Use the military to do it.

]]> By: Matt Nolan http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20637 Thu, 30 Jul 2009 01:53:32 +0000 http://www.tvhe.co.nz/?p=4172#comment-20637 @aps

Dr Nana and the other BERL economists are very good economists. However, in this case they have a very different set of beliefs regarding how the world works to me. In the case of the BERL report it was the same thing.

]]> By: aps http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20634 Thu, 30 Jul 2009 01:47:05 +0000 http://www.tvhe.co.nz/?p=4172#comment-20634 Is Ganesh Nana just having a bit of a rough patch or are his recent contributions reflective of his career to date? I have attended a seminar he gave to an industry group and found it pretty underwhelming, but otherwise have no experience of his work except for the recent defence of BERL’s alcohol report and the comments made on the NZD.

Also, is he typical of the quality of personnel at BERL ?

]]> By: Matt Nolan http://www.tvhe.co.nz/2009/07/29/high-dollar-is-a-symptom-not-a-cause/#comment-20601 Wed, 29 Jul 2009 03:09:49 +0000 http://www.tvhe.co.nz/?p=4172#comment-20601 “I really like your medical analogy because I think it almost supports Ganesh. Structural issues are hard to fix and take a long time. If we can ease the symptoms at a reasonable cost while we work on curing the underlying problem, then why wouldn’t we?”

😀

In some terms I agree with you, however in this specific example I disagree.

If an “artifically” high dollar was the only reason for domestic pain then sure, hitting the symptoms would be a good solution. However, in this case there is no direct link between the “symptom” (a moving price) and the “pain” because if we hold the exchange rate down other things will be forced to adjust to keep us structurally unadjusted – note impossible trinity.

It is like a medical procedure that tries to reduce a symptom but does not influence the pain or the underlying medical issue.

Finally, if there was a way to ease the pain from some issues (which is what we are doing by lowering interest rates at the moment) and the benefit of this exceeds the cost we should do it. But this isn’t the case.

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