Infometrics

Regional NZ’s exposure to China shocks

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It was interesting to see Gulnara’s post about the coronavirus and the potential implications for the New Zealand economy yesterday. In it she stated that – if we use SARS to understand any potential shock we need to correct for the way New Zealand’s relationship with China has evolved in the intervening years.

Given this we felt that it would be useful for us to share an article Brad Olsen wrote in February 2019 on regional New Zealand and China (which also helped inform Brad’s recent comments on the coronavirus here) – which may shed some light on this issue. The article can be found here, and is reproduced below.

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Gulnara Nolan

The economic impact of the coronavirus in New Zealand

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In a recent post I discussed the impact on the broad economy associated with the coronavirus.  However, this is only a starting point for thinking about economic impacts – the next question is how we can understand the composition of the shocks, how we can measure this in real time, and how we can consider the areas where policy is relevant.

This is something I want to discuss here.

In that regard the Spin Off just had a good article talking about economic consequences, and interest.co.nz also had a good piece talking to the bank economists.  Finally, Westpac released a bulletin that discusses what they think is important. This is a complement to their pieces as I want to use the same “demand” and “supply” shock analysis as I did in the prior post to bring some of these concepts out.

What I’m discussing below is how I would look at this sort of crisis in real time as an interested observer – I work in research not policy, so I see this as a chance to open up a dialogue with other interested people in the comments below.  Any insights you have would be richly appreciated.

Furthermore, as I just don’t have the data on hand I would like (again I work in research, not as a forecaster, an investment analyst, or a policy person) I can only talk about what I would use – if anyone has been using this data and can discuss trends it would be great to chat about this in comments!

Note: Thanks to Matt Nolan for discussing this with me, and helping me to get the right data sources for this post.

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Gulnara Nolan

The coronavirus and the general NZ economy

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The coronavirus has been in the news, with its relatively rapid spread a cause for concern.  This has important welfare and wellbeing effects associated with the pain people might experience due to the coronavirus. 

However, today I am going to discuss how we can think about the consequences of a disease outbreak for the general economy – or in terms of broad macro stabilisation or monetary policy. 

These lessons can help us understand some of the broad consequences of a disease outbreak which can then be extended to ask other policy related questions (eg how the virus might disproportionately affect industry sectors in NZ, what areas are harm reduction policies particularly important).

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Gulnara Nolan

From the Great Depression to the contemporary days: is the reallocation of resources a solution?

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Former Governor of the Bank of England, Mervyn King is suggesting that “Economics Needs a Post-Crash Revolution” in a seeming admission that current frameworks don’t work in a world of radical uncertainty and necessary reallocation.

Is the former BOE governor and academic icon correct, or is this an unfair critique of the mainstream?  As a summary, I have two issues with his argument:

  1. Reallocation does not have anything to do with “average demand”, which is predominantly a monetary policy issue,
  2. If excessive reallocation is necessary and requires government assistance, where are the “high return” industries that need reallocation to them?

Let me explain.

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Gulnara Nolan

Back from honeymoon and ready for economics

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Matt and myself have just returned from our wedding, honeymoon, and birthday party overseas, and I’m eager to post a lot more content this year!

However, before doing so I thought it would be fun to share a couple of pictures of our recent journey.

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Gulnara Nolan

A note on Qualitative easing

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While the concept of quantitative easing has received a lot of attention amongst economists, qualitative easing was not as widely discussed. Qualitative easing is a monetary easing program that was used by Japan in 2013 and represents some elements of the QE programmes in the US. 

The outline of how it works is well described here, and so I want to focus a little bit more on why.

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