This is particularly clear if we think about policy approaches that target the exchange rate in one way or another. Consider an ANZAC dollar. The NZ dollar has fallen by over 10 percent against the AU dollar since 2006, a period in which Australia experienced an unprecedented minerals boom and very strong growth.
If our currency had been pegged to the AU dollar, New Zealand’s exchange rate to the rest of the world would have been higher, interest rates would have risen three times already, and our recession would probably have been deeper. The argument is even stronger for other currencies, such as the US dollar.