Abstract
This paper examines the exchange rate effects of monetary policy shocks in New Zealand in the framework of the international monetary transmission mechanism. The model variables are suggested by a hybrid New Open Economy Macroeconomic (NOEM) model. Our empirical analysis indicates plausible dynamic behaviour of nominal and real effective exchange rates in New Zealand due to unexpected monetary policy innovations, without any significant anomalies. In all cases, the impact effect of domestic monetary contraction is found to be an appreciation of the nominal and real effective exchange rates.
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