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Adding birds of New Zealand to hawk/dove/owl classification of central bankers

Summary:
Christian Hawkesby, Assistant Governor of RBNZ in this speech adds names of NZ birds to classify central bankers.  He says that in the Māori culture, the hawk (kahu) and the dove (kereru or native wood pigeon) both have prominent roles. For a long time, followers of monetary policy have developed a shorthand to categorise central banks and central bankers as either ‘hawks’ or ‘doves’. The origins of these terms can be traced back to descriptions used to capture the attitudes of leaders to war, with a hawk more inclined to go to war, and a dove more inclined to seek peace. In the midst of the Vietnam War, these terms found their way into monetary policy and were used in the minutes of a US Federal Reserve meeting in May 1966.12 In this context, a hawk was determined to bring inflation

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Christian Hawkesby, Assistant Governor of RBNZ in this speech adds names of NZ birds to classify central bankers.  He says that in the Māori culture, the hawk (kahu) and the dove (kereru or native wood pigeon) both have prominent roles.

For a long time, followers of monetary policy have developed a shorthand to categorise central banks and central bankers as either ‘hawks’ or ‘doves’.

The origins of these terms can be traced back to descriptions used to capture the attitudes of leaders to war, with a hawk more inclined to go to war, and a dove more inclined to seek peace.

In the midst of the Vietnam War, these terms found their way into monetary policy and were used in the minutes of a US Federal Reserve meeting in May 1966.12 In this context, a hawk was determined to bring inflation down by having interest rates higher than otherwise, and a dove more inclined to tolerate bouts of higher inflation with a preference to keep interest rates lower than otherwise.

As time has passed and inflation has remained relatively low and stable for past 25 years, this original definition has evolved into a shorthand used by market participants where any decision by a central bank that results in interest rates higher than expected is “hawkish” and any decision where interest rates are lower than expected is “dovish”.

In Māori culture, the hawk (kahu) and the dove (kereru or native wood pigeon) both have prominent roles.

The kahu represents strength and dominance as the most powerful bird in the environment. The kererū represents eternal life, and was once traditionally offered as a sacrifice to Papatuanuku (the earth mother) to promote life and growth in the forest of Tane Mahuta. For these reasons, the feathers of both the kahu and kererū are highly regarded and prominent on the Korowai (cloak) of Māori chiefs.

However, for mon policy another bird is more appropriate –kōtuku (white heron):

However, when it comes to our approach to making monetary policy decisions under uncertainty, it may be that another bird – that is also sought after on the cloaks of chiefs – provides a more fitting metaphor: the kōtuku (white heron) that adorns our $2 coin.

A key feature of our least regrets approach is responding to the environment, risks and uncertainties, including:

    • the starting point of the economy,
    • the balance of risks, and
    • threats to achieving our mandate.

It requires an approach that is adaptable, sometimes moving with caution in slow, small steps, and other times moving with confidence, quickly in large steps to remain successful.

In Māori culture, there are two whakataukī (proverbs) involving the kōtuku that capture this trait of responding to the environment around you.

The saying “he kōtuku rerenga tahi” loosely translates to “a white heron’s flight is seen but once”.

This whakataukī expresses an idea that “once ready, open your wings and commit to flight”. Applying this to the protocols of a marae (meeting house), it is used as a reminder that when it is your opportunity to speak, you may only get one chance, so you must take your chance and be bold.

In the world of setting monetary policy, this proverb translates to those times when:

    • the outlook for the economy has been subject to large and uncertain changes,
    • the risks are heavily skewed in one direction, and
    • there is a material threat of not achieving your mandate.

In that situation, the path of least regret is to move quickly and take large steps to provide more confidence that policy settings will be appropriate if the risks to the outlook eventuate. As described above, this approach is consistent with our actions (and other central banks globally) through the early stages of COVID-19.

Hmm..

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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