In nominal GDP targeting, the central bank targets a certain annual rate of nominal GDP (e.B 5%). The nominal GDP rate has two components: in an economy, policy changes are a matter of compromise. As far as inflation is concerned, the compromise lies in unemployment. The Phillips curve, developed by New Zealand economist Bill Phillips, showed that as inflation rises, unemployment falls and vice versa. High inflation rates are not desirable. However, if inflation is reduced by stifling economic growth, this will lead to an increase in unemployment. Mass unemployment is also undesirable. As a result, the RBNZ is given the delicate task of balancing inflation and unemployment. The first ATP was signed in March 1990 between the Minister of Finance, the Honourable David Caygill, and the Governor of the Reserve Bank, Dr.

Don Brash. It has set itself the political objective of achieving an annual inflation rate of 0 to 2% by the end of December 1992. This deadline was then extended by one year in the PTA, which was signed in December 1990 between the Governor and Secretary of the Treasury Ruth Richardson. 24. The new wording, which linked monetary policy to broader economic objectives, presented no difficulty for the Bank, since it had considered, since the entry into force of the 1989 Law, that monetary policy could most effectively contribute in the long term to broader economic objectives, such as promoting economic growth with a focus on maintaining price stability. In line with the arguments put forward in the Bank`s many speeches and publications, the new wording of the PTA emphasized this link more clearly than in previous FTAs and did not imply a broader set of objectives for monetary policy. 22. The extension of the inflation target was acceptable to the Governor because the broader range was still considered consistent with the overall objective of price stability and because he believed that it would not significantly affect the credibility of the monetary policy framework or inflation expectations (which were more firmly anchored in the mid-1990s). While the widening of the range did not result in a significant change in the Bank`s approach to monetary policy, it did allow for slightly greater variability in the rate of inflation, thus helping to reduce the constraints associated with reducing the inflation margin. Due to the highly uncertain evolution of COVID-19 and its potentially major impact on the Thai economy, the Ministry of Finance and the Bank of Thailand would continue to coordinate fiscal and monetary policies, which would be harmonized and complementary.

At present, the GPP continues to focus on supporting economic recovery and would be willing to use policy instruments in an integrated manner to effectively achieve monetary policy objectives. In December 1996, the PTA inflation target range signed between the Right Honourable Bill Birch and the Governor of the Reserve Bank, Dr. Don Brash, was expanded to 0-3 per cent. The extension of the inflation target range is the result of coalition negotiations between the National Party and the New Zealand First Party after the first Mixed Member Proportional (MMP) elections. [19] A new TPA was signed in December 1997 between reserve bank Governor Dr. Don Brash and Treasurer, the Honourable Winston Peters, before the Governor began his third term as Reserve Bank Governor. 16. Second, there was no need to renegotiate the PTA in the event of a price shock. This change was initiated by the bank in order to simplify the PTA and reduce the need for potentially more frequent future amendments to the PTA that could have occurred under the original wording. Under the new TPA, in the event of a price shock, the Bank was required to explain in the monetary policy statement the impact of the price shock on the CPI and the likely achievement of the inflation target range, and to describe the measures taken to bring inflation back to the target range.

The price shock events mentioned in the PTA were largely the same as in the original PTA, although a new one was added to the list – changes in state or local government levies. 15. First, it extended the deadline for reaching the inflation target range by one year, until the 31st. December 1993, in accordance with the election promise of the new government and the Bank`s desire to alleviate the transitional costs associated with the disinflationary process (in particular with a view to facilitating the adjustment of the real exchange rate). The change came at a time when inflation was still well above the target range and before it became clear that inflationary pressures were easing faster than previously thought. [38] Bank of Canada, „Renewal of the inflation-control target – Background information“ (October 2016), page 3. [4] Dr. Don Brash, Governor of the Reserve Bank „Inflation targeting 14 years on“ (speech at the American Economics Association conference in Atlanta, January 5, 2002).

[31] Graeme Wheeler, Governor of the Reserve Bank, „Some thoughts on the balance of risks around the Reserve Bank`s monetary policy setting“ (speech at Craigs Investment Partners` Investor Day in Auckland, March 2, 2017). Gross domestic product (GDP) targeting and price level targeting have been proposed as different monetary policy frameworks. In a recent article, John C. Williams, president and CEO of the Federal Reserve Bank of San Francisco, said it was appropriate to reassess monetary policy conditions in an environment where natural real interest rates have fallen. [32] The natural interest rate is the short-term interest rate at which monetary policy is neither accommodative nor contractionary. A lower natural interest rate offers less room to stimulate the economy during an economic downturn, as central banks are reluctant to lower interest rates below zero. [33] In the article, Williams stated that the following guidelines were worth considering: [34] 5. The PTA is an integral part of New Zealand`s monetary policy framework.

While the 1989 Law sets out the primary objective of monetary policy to achieve and maintain price stability, the PTA is the mechanism by which this objective is implemented. It should be noted that the law is silent on how to operationalize price stability. In principle, the PTA could specify a number of alternative mechanisms to achieve the outcome of price stability, including, for example, the nominal GDP target, the monetary target, the use of the exchange rate as a nominal anchor or a price level target. However, it was decided from the outset that the most appropriate mechanism to ensure price stability in New Zealand would be inflation targeting, and this approach has been adopted in all EPAs since the Act came into force in early 1990. Table 1 presents the TAPs signed to date, the signatories and the inflation target within each APT. the period to be extended implicitly; The President. — I call on the Group of the European People`s Party (Christian Democratic Group). A mutual agreement between the OAG and the Minister of Finance states that in 2014, the International Monetary Fund issued a discussion paper outlining the reasons for raising the long-term inflation target for central banks to 4%. According to the author, „a higher inflation target increases long-term nominal interest rates and allows for significant rate cuts before the zero limit becomes binding. Flexibility makes it easier for a central bank to restore full employment in the event of an economic recession.

[35] There is usually a delay of at least one year until the full effect of a change in monetary policy spreads through an economy and has the desired impact on inflation. For this reason, the Reserve Bank has a medium-term inflation target. 13. The adoption of the 1989 Act and the introduction of the first PTA did not lead to an immediate change in the stance and implementation of monetary policy in the early 1990s, as the Bank had already oriented its monetary policy towards reducing inflation to target by 0-2 per cent by mid-1988. More generally, since 1984, the Bank has focused its monetary policy exclusively on lowering the rate of inflation. The adoption of the 1989 law and the promulgation of the first PTA thus represented the continuation of the monetary policy approach that had developed in the second half of the 1980s. However, the law and the PTA have helped to refine the clarity of monetary policy objectives and provide a stronger basis for promoting public understanding of monetary policy and lowering inflation expectations. .