Is There a Bank‐Lending Channel of Monetary Policy in New Zealand?

The results reported in the paper cast serious doubt on the existence of a potent bank‐lending channel of monetary policy in New Zealand either before or after the reforms of the mid‐1980s. We find no sound evidence of a link between a number of different finance mix variables and economic activity in New Zealand. Similar, unfavourable results are reported by the investigation of the connection between movements in an interest rate spread and real economic performance. Moreover, neither the finance mix variables nor the spread respond consistently to changes in various indicators of monetary policy.