Last year, I addressed the subject of New Zealand’s balance of payments deficit. Today, I want to talk a little about a related issue, the exchange rate and its behaviour in recent years, because I recognise that, in an export-oriented economy like that of Christchurch, the exchange rate has a substantial impact on the viability of many businesses.
First, to help regulators better anticipate and prepare for threats to financial stability, legislatures in both the United States and other developed economies have instructed central banks and regulatory agencies to adopt what has been called a macroprudential approach to supervision and regulation – that is, an approach that supplements traditional supervision and regulation of individual firms or markets with explicit consideration of threats to the stability of the financial system as a whole.