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While most books on derivatives discuss how they work, this book looks at the contributions of derivatives to overall economic well-being. It examines both the beneficial and adverse effects of derivatives trading from the perspectives of economic theory, empirical evidence and recent economic history. Aiming to present the concepts in a fair, non-ideological, non-mathematical and simple manner, and with the authors' own synthesis, it draws on economic insights from relevant work in other disciplines, particularly sociology and law. The book also presents some new theoretical ideas and recommendations towards a pragmatic and practical approach for policy-makers. The ultimate objective is to provide a basic conceptual framework which will help its readers form a judgement on whether, when and how derivatives are beneficial or harmful to the economy.

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Under section 8 of the Reserve Bank of New Zealand Act 1989 (the Act), the primary function of the Reserve Bank is to formulate and implement monetary policy directed to the objective of achieving and maintaining stability in the general level of prices. The Act provides the Reserve Bank operational independence in implementing monetary policy. However, the Reserve Bank must implement monetary policy directed towards the goal set out in a Policy Targets Agreement (PTA). This goal must be consistent with the price stability objective of the Act. The PTA is agreed between the Minister of Finance and the Governor of the Reserve Bank.

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