New Discussion Papers available on RBNZ website

New Discussion Papers available on RBNZ website 9 September 2009

The following Discussion Papers have been released on the Reserve Bank's website. The discussion papers are available at http://www.rbnz.govt.nz/research/discusspapers/

DP2009/08
Evaluating a monetary business cycle model with unemployment for the euro area
By Nicolas Groshenny
http://www.rbnz.govt.nz/research/discusspapers/dp09_08.pdf

Abstract
This paper estimates a medium-scale DSGE model with search unemployment by matching model and data spectra. Price markup shocks emerge as the main source of business-cycle fluctuations in the euro area. Key for the propagation of these disturbances are a high degree of inflation indexation and a persistent response of monetary policy to deviations of inflation from the target.

DP2009/09
Entrepreneurship and aggregate merchandise trade growth in New Zealand
By Richard Fabling and Lynda Sanderson
http://www.rbnz.govt.nz/research/discusspapers/dp09_09.pdf

Abstract
We present a descriptive analysis of firm-level merchandise trade, focusing on the role of entrepreneurial exporting behaviour. We document two aspects of the dynamics of trade - the contribution of novel export activity to aggregate trade growth and, conversely, the substantial exit rates of new trade relationships. The unique contribution of this paper lies in the detailed and comprehensive data we have available on market and product choices. Specifically, we make use of shipment-level goods trade data, linked to information for the universe of economically active New Zealand manufacturers, to examine trade at the firm-level and at the product-country-firm nexus. Our growth decomposition and survival analysis suggest several themes: (a) novel market entry is a significant contributor to aggregate export growth; (b) the study of international entrepreneurial behaviour should encompass not just de novo entrants, but the broad range of trade innovations initiated by incumbent exporters; (c) much expansion in trade appears to be incremental in nature; (d) despite this, such innovations appear to be inherently risky; and (e) experience and scale appear to be key factors in overcoming these risks (or at least proxies for such factors).

DP2009/10
A theoretical foundation for the Nelson and Siegel class of yield curve models
By Leo Krippner
http://www.rbnz.govt.nz/research/discusspapers/dp09_10.pdf

Abstract
This article establishes that most models within the popular and widely-used Nelson and Siegel (1987, hereafter NS) class, with one notable exception being the Svensson (1995) variant, are effectively reduced-form representations of the generic Gaussian affine term structure model outlined in Dai and Singleton (2002). That fundamental theoretical foundation provides a compelling case for applying certain NS models as standard tools for yield curve analysis in economics and finance: users get the well-established pragmatic benefits of NS models along with an assurance that they correspond to a well-accepted set of principles and assumptions for modelling the yield curve and its dynamics.

ENDS

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