Maine Perspective Front Page
Economic Modeling Expert Gets Close Look at International Monetary Policy
New economic modeling techniques used by world organizations and the governments of small, open economies were the focus of a year-long sabbatical in New Zealand by Jim Breece.
Breece, associate professor of economics, spent a year at the Reserve Bank of New Zealand (RBNZ) in the Modeling Group of the Economics Department, located in Wellington.
Breece did economic modeling and forecasting based on a new core economic forecasting model for RBNZ, the central government bank responsible for regulating private banks and setting monetary policy.
The Economics Department of the bank is made up of approximately 35 economists. In addition to modeling, they conduct quarterly economic forecasts, monitor global economic events, conduct economic inquiries and make monetary policy recommendations to the governor of the RBNZ, who has a position much like that of Federal Reserve Chair Alan Greenspan in this country, Breece says.
The New Zealand economy recently switched to a free market system. New Zealand was once considered one of the most socialist countries outside Eastern Europe. In 1985, the country implemented reforms that opened the economy, in what is referred to as the New Zealand Experiment.
"As an economist, it was exciting to live in a country where these social experiments were being conducted and watch it from the inside out," Breece says.
While he was there, the Asian financial crisis first appeared, which affected New Zealand, which exports commodities to Asia and Japan. "They immediately felt the economic turmoil and went right into a recession," says Breece. "It was a bit chaotic part of the time I was there, when we were deciding how to appropriately set monetary policy when facing a recession."
Breece says the size of New Zealand, with a population of around 3 million, gave him an opportunity to be close to monetary policymakers, an experience he would not have in this country.
Breece, who specializes in international finance and macroeconometric modeling, similarly spent a sabbatical as a visiting research scholar at the University of Melbourne, Australia, in 1990-91. In Maine, Breece developed the Maine Quarterly Forecasting Model in cooperation with the State Planning Office, and established the New England Electronic Data Center, offered by The Federal Reserve Bank of Boston and UMaine to provide current regional economic information. Currently, Breece is one of six members of the Maine Revenue Forecasting Committee, responsible for forecasting future state revenues that go into determining Maine's biannual budget.