(With credible financial policy, of course.) Another interesting case, from JP Koning's Blog "Moneyness"
Koning describes the lack of inflation every bit a trial of the perceived "permanence" of the increased reserves. I intend it comes from the fact that reserves pay involvement -- every bit they produce inwards New Zealand. Either way, the betoken is that banks together with people are happy to sit down on interest-paying money, inwards enormous quantities, only every bit they are on bonds.
The corresponding inflation together with involvement rates:
RBNZ decided to 'flood' the arrangement amongst balances to brand things to a greater extent than fluid. This involved conducting opened upwards marketplace purchases that bloated the monetary base of operations (comprised of currency addition deposits) from to a greater extent than or less NZ$6 billion inwards mid-2006 to only nether NZ$14 billion past times Dec of that year. See nautical chart below.
(Note that the RBNZ's problems began far earlier the credit crisis together with were due exclusively to the peculiar construction of the clearing system, non New Zealand's economy.)
Koning describes the lack of inflation every bit a trial of the perceived "permanence" of the increased reserves. I intend it comes from the fact that reserves pay involvement -- every bit they produce inwards New Zealand. Either way, the betoken is that banks together with people are happy to sit down on interest-paying money, inwards enormous quantities, only every bit they are on bonds.
The corresponding inflation together with involvement rates:
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| Source: Reserve Bank of New Zealand http://www.rbnz.govt.nz/statistics/key_graphs/inflation/ |
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| Source: Reserve Bank of New Zealand http://www.rbnz.govt.nz/statistics/key_graphs/90-day_rate/ |
