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Comments on: PTA’s, currency, and monetary policy http://www.tvhe.co.nz/2012/09/07/ptas-currency-and-monetary-policy/ The Visible Hand in Economics Mon, 10 Sep 2012 04:40:14 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Matt Nolan http://www.tvhe.co.nz/2012/09/07/ptas-currency-and-monetary-policy/#comment-39906 Mon, 10 Sep 2012 04:19:00 +0000 http://www.tvhe.co.nz/?p=7514#comment-39906 In reply to Raf Manji.

The issue you have raised is about the real exchange rate – which is independent of monetary policy.

We have had this problem since well before the cash rate and inflation targeting, and well before the MCI (which included nominal exchange rate targeting), and well before the floating exchange rate regime. It is an issue of fundamentals – which we do need to understand – but it has nothing to do with monetary policy.

]]> By: Raf Manji http://www.tvhe.co.nz/2012/09/07/ptas-currency-and-monetary-policy/#comment-39899 Mon, 10 Sep 2012 03:00:00 +0000 http://www.tvhe.co.nz/?p=7514#comment-39899 Perhaps the problem is the accumulated current account deficit? If so, how do we deal with that? By selling stuff: assets or goods+services. Assets are going all the time but our trade balance is not going to do the job with the exchange rate at its current level. We need to rebalance that deficit, which will reduce pressure on the currency. So we need to make our exports cheaper or imports more expensive.

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