On December 12th, 2016, Prof. Bai-ding Hu from Lincoln University, New Zealand, gave a report entitled “Exchange rate puzzle: the case of New Zealand” at CEEP-BIT. The report was hosted by A. Prof. Bi-ying Yu, some other teachers and students attended the report.
　　In this report, Prof. Bai-ding Hu examines the impact of monetary policy shocks on the exchange rate in the New Zealand context using an event-study approach. Since March 1999 the Reserve Bank of New Zealand (RBNZ) has adopted Official Cash Rate (OCR) as the monetary policy instrument. Therefore, the present research uses changes in OCR expectations as the measure of monetary policy shock. In view of Zettelmeyer (2004), short-term interest rate changes are sifted to obtain those that are generated by OCR surprises by way of instrumental variable regressions. This implies that short-term interest rates can be the channel for OCR surprises to enter the currency exchange market. His results indicate that a positive monetary policy shock, measured as an increase in the instrumented short-term interest rates, resulted in a depreciation of the exchange rate during the pre- and post-Global Financial Crisis (GFC) period, which is evidence for the exchange rate puzzle (ERP). During the GFC period, the ERP was absent, which lends support to Dornbusch’s (1976) overshooting hypothesis and uncovered interest parity.
　　Prof. Bai-ding Hu now works in the Faculty of Agribusiness and Commerce at Lincoln University, Christchurch, New Zealand. He holds a PhD in economics from the University of Western Australia. His current research interests include energy economics, productivity and efficiency, and Chinese economy.

　　After this lecture, teachers and students from CEEP-BIT had a heated discussion with Prof. Hu and had a picture taken together.