Alan Bollard: Coping with shocks – a New Zealand perspective

All economies face “shocks” – unexpected events provoking some sort of response. Shocks affect households and firms at the micro level, and the path of economic growth and inflation at the macro level. For a small and open economy like New Zealand, many of the shocks shaping economic activity have an international dimension, and this turbulence is part and parcel of the economic landscape. New Zealand’s economic institutions and policymaking frameworks recognise this volatility, and over time, they have responded in a manner which has improved the overall resilience of the New Zealand economy to most shocks. Indeed, the last ten years has been a period of relatively stable inflation outcomes both in New Zealand and globally, due in no small manner to the efforts of monetary policy in pursuing the mandate of price stability.