Question 1: Application of a Theoretical Model
In this question you will consider an issue that has affected the New Zealand economy within the last 10 years. You are required to make use of the macroeconomic theory and policy you learnt in class to provide a critical analysis and evaluation of a policy undertaken by Government OR the Reserve Bank of New Zealand to address the issue.
To assist you in the completion of this question, use the following structure:
a) Research question
i. Your research questions; i.e. the questions you seek to answer; the objectives of research
ii. Motivation; explain precisely why the topic is problematic and worth discussing with reference to the literature
b) A review of appropriate theoretical literature
i. Review of related macroeconomic theory
ii. Review of related research to your topic
c) Analysis and evaluation of policy
i. A clear and thorough description of the policy response in attempting to address the issue
ii. Reflect on whether that policy action was effective iii. Give recommendations of alternative measures that could have been employed
iii. Give recommendations of alternative measures that could have been employed
Question 2: The Macroeconomics of Liquidity in Capital Markets and the Corporate Sector
Liquidity creation has been migrating away from traditional supervised depository institutions. Since the 2008-09 financial crisis the migration has gone beyond money markets and broker-dealers within bank holding companies to other nonbank financial entities. Open-ended mutual funds are increasingly important for financing and liquidity provision in corporate bond markets and in other fixed income markets. There is a commensurate increase in the demand for money in mutual funds to help provide liquidity. The corporate sector too has exhibited striking growth in its appetite to hold liquid assets.
You have to discuss the co-movement of credit risk and liquidity risk in the banking sector. To assist you in the completion of this question, use the following structure:
a) Review the related research on credit risk and liquidity risk. You may use examples from abroad
Question 3: Desirability of Negative Interest Rate Policy
With interest rates close to zero in the aftermath of the Great Financial Crisis, several central banks around the world have introduced unconventional policies to provide additional monetary stimulus. One example is the decision by five central banks – Danmarks Nationalbank (DN), the European Central Bank (ECB), Sveriges Riksbank, the Swiss National Bank (SNB) and most recently the Bank of Japan (BoJ) – to move their policy (interest) rates below zero, traditionally seen as the lower bound for nominal interest rates. The motivations behind the decisions differed somewhat across jurisdictions, leading to differences in policy implementation.
You have to discuss the possible effects of negative interest rate policy on the economy. To assist you in the completion of this question, use the following structure:
a) Review the related research on the desirability or effects of the negative interest rate policy