Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Bulletin article discusses unconventional monetary policy


Bulletin article discusses unconventional monetary policy since the Global Financial Crisis

An article published today in the Reserve Bank Bulletin examines the international experience of several central banks since the global financial crisis of 2007/08, and considers the potential for such policies in the New Zealand environment.

Many of the world’s major central banks cut policy interest rates to zero during the crisis. However, these economies still needed further stimulus to meet the objectives of monetary policy. As a result, some central banks introduced what were termed “unconventional” monetary policies to further ease financial conditions and provide additional stimulus for output and inflation. These policies included negative policy interest rates, large-scale asset purchases, and targeted term lending to the banking sector.

Overall, these policies were successful in easing financial conditions, and emerging research suggests they boosted inflation and activity. However, they were not without potential costs. Central banks have successfully managed additional balance sheet risks, potential financial stability risks and the possibility for adverse impacts on financial markets.

Currently, monetary policy settings are stimulatory in New Zealand, and the Bank is not projecting a significant decrease in the OCR. With the OCR at 1.75 percent, the Bank has significant further room to ease monetary policy in a conventional way, and conventional monetary policy remains effective in influencing inflation and activity. However, it is prudent to learn from other countries’ experiences with unconventional monetary policy and examine how such polices might work in New Zealand if the need arises.



The authors, Sarah Drought, Roger Perry, and Adam Richardson, find that there is qualified potential for such policies in New Zealand. Interest rates could likely be lowered into modestly negative territory, and targeted term lending facilities could be introduced. Asset purchases would also be effective. However, the structure and size of New Zealand’s financial markets could limit the overall scope of such a programme. In addition, the exchange rate is likely to play a more important role in easing financial conditions than was seen in the United States and the euro area.

More information
Aspects of implementing unconventional monetary policy in New Zealand

ends


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Fish & Game Support: Canterbury Officer Of Health Warns On Nitrates In Water

"Nitrate testing of 114 drinking water samples from across the Canterbury plains showed that more than half of them were above the level considered safe in the world's largest ever study on the impacts of nitrates in drinking water." More>>

ALSO:

Partnerships Investment Round: Government Invests In Cancer Research, Pines, Ryegrass

The Government will invest $14.4 million into transformative new scientific research programmes including cutting-edge cancer treatment and vertical farming, Research, Science and Innovation Minister Megan Woods announced today. More>>

ALSO:

Stats: Net Migration Remains High

“Since late 2014, annual net migration has ranged between 48,000 and 64,000,” population indicators manager Tehseen Islam said. “The only previous time net migration was at these levels was for a short period in the early 2000s.” More>>

ALSO:

Retail: Costco To Open First NZ Store At Westgate In Auckland

American multi-national discount store operator Costco Wholesale is planning to open its first New Zealand store at the Westgate shopping centre in Auckland’s north-west. More>>

ALSO:

RNZ Report: Fungal Disease Claims Life Of Seventh Kākāpō

A seventh kākāpō being treated for the respiratory disease aspergillosis has died. Nora 1-A was just over 100 days old and was the sickest of the kākāpō being treated at the New Zealand Centre Conservation Medicine at Auckland Zoo. More>>