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I have taken note of the central banker report cards, and I am, of course, very pleased with my grade. I will try to live up to your expectations and perform even better next year.

Dr A.H.E.M. Wellink, President

De Nederlandsche Bank


Editor's note: President Wellink received a B+ in our September 1997 "Central Banker Report Cards."

While I appreciate your grading me B+ in the September 1997 issue of Global Finance, there are three errors, one of them serious, in your commentary.

The minor errors relate to when I became governor (it was 1988 and not 1992), and the forecast growth of the New Zealand economy in 1997 (no public or private sector commentator of whom I am aware suggests that the figure will be as low as 0.9%, and our own figure is 2.5% for the year to March 1998).

The more serious error is your assertion that the Reserve Bank now has an objective to "ensure sustainable growth and employment." That is totally incorrect.

The Policy Targets Agreement signed between the government and myself in December 1996 widened the inflation target from 0-2% to 0-3% and did modify the wording of the agreement slightly, to make it clear that price stability was being sought as a way of ensuring that monetary policy makes its maximum possible contribution to employment and growth. There is absolutely no suggestion in the wording that monetary policy can or should be directed at employment and growth directly.

Donald T. Brash, Governor

Reserve Bank of New Zealand


In the September edition of Global Finance you perpetuate the myth that Don Brash has to ensure sustainable growth and employment at the expense of fighting inflation. That is what New Zealand's current treasurer, Winston Peters, promised in last year's election. But the December 1996 Policy Targets Agreement shows that price stability (now 0-3%) remains the sole objective of monetary policy.

Rex Oliver, Senior Lecturer

Centre for Banking Studies

Massey University

Palmerston North, New Zealand

Editor's comment: The relevant passage in the 1996 Policy Targets Agreement is a bit ambiguous, perhaps for political reasons: "The Reserve Bank shall formulate and implement monetary policy with the intention of maintaining a stable general level of prices, so that monetary policy can make its maximum contribution to sustainable economic growth, employment and development opportunities within the New Zealand economy." Governor Brash and Mr Oliver construe that to mean not that monetary policy will take growth and employment as objectives but that, by maintaining stable prices, it will contribute to growth and employment-a subtle distinction. Our own bias is that, in evolving with the times, monetary policy can find a balance between driving a stake through inflation's heart and allowing sufficient room for growth and employment. The fact that Mr Brash's inflation target was expanded to 0-3% -which implies that he could be a bit looser-led us to construe the passage to mean that he ought to take growth and employment into consideration.

I do believe that your assessment of the South African situation is rather unreasonable and based on a number of misconceptions.

First, in South Africa, it is not the governor of the Reserve Bank who is responsible for exchange controls, but the minister of finance. The Reserve Bank only acts as an agent. I am nevertheless prepared to share the responsibility for the policies we follow in this regard. Even so, you fail to give recognition to the fact that over the past three years South Africa removed more than 50% of the exchange controls that existed at the beginning of 1994.

You should be aware also of the fact that corporations, institutional investors, and private individuals now have the right to invest funds overseas, albeit within limits that are gradually being raised and removed. …