Co-Movement Towards a Currency or Monetary Union? An Empirical Study for New Zealand by

This paper analyses whether New Zealand would be ready to form a currency or monetary union with either Australia, the 11 EU countries that are members of the EMU, Japan, or the US, if the criteria that have been put forward for the EMU are applied. The analysis is an empirical study with data from the mid 1980s to 1998, using cointegration techniques to search for co-movement and convergence in key economic variables: interest rates, in ation rates, exchange rates, and de cit/GDP ratios. JEL Classi cation: F42, F33 First version: October/November, 1999. This version: May, 2000. University of Canterbury and York University. Address: Department of Economics, University of Canterbury, Private Bag 4800, Christchurch, New Zealand. E-mail: [email protected]. The author thanks David Hargreaves, John McDermott, participants at a seminar at the Reserve Bank of New Zealand and at the New Zealand Econometrics Study Group Summer 2000 Meeting in Wellington for helpful comments on an earlier version. The usual disclaimer applies. Financial support from the Department of Economics at the University of Canterbury and from the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged.