It’s the same this time? Cycles and depressions in New Zealand history

Abstract

It is said that a banker’s most dangerous expression is ‘It’s different this time’, a phrase used to justify repeating actions which proved mistaken in the past. The economist’s approach is a little different. Ideally, the same basic model should apply on all occasions. However, each time its application differs because:• the parameters are different;• the external shocks are different;• the policy institutions (and therefore their reaction functions) are different. As we face what may be the greatest financial crisis that New Zealand has ever experienced – albeit not necessarily the greatest economic crisis – we can try to use the experiences of the past to identify the underlying issues and the potential policy responses.