The Neutral Interest Rate
Rachael McCririck and
Additional contact information
Rachael McCririck: Reserve Bank of Australia
RBA Bulletin (Print copy discontinued), 2017, 09-18
Central banks monitor the neutral interest rate for a number of reasons, a key one being that it provides a benchmark for assessing the stance of monetary policy. This article describes the determinants of the neutral interest rate and discusses its trends in Australia over recent decades. We estimate that Australiaâ€™s neutral interest rate has declined by 150 basis points since 2007 and is currently around 1 per cent. However, because we cannot observe the neutral rate directly, there is considerable uncertainty around these estimates. The fall over the past decade is largely attributable to a decline in the economyâ€™s potential growth rate and an increase in risk aversion of households and firms.
Keywords: neutral interest rate; monetary policy; cash rate; potential growth (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
https://www.rba.gov.au/publications/bulletin/2017/ ... al-interest-rate.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:rba:rbabul:sep2017-02
Access Statistics for this article
RBA Bulletin (Print copy discontinued) is currently edited by Luci Ellis
More articles in RBA Bulletin (Print copy discontinued) from Reserve Bank of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Paula Drew ().