What is the neutral real interest rate, and how can we use it?

Release date
Vol. 64. No. 3. September 2001
Joanne Archibald; Leni Hunter
This article sets out the Reserve Bank's conception of the "neutral real interest rate", and identifies factors that influence its level. These factors provide a starting point for thinking about what might cause the neutral real interest rate to change over time, or differ across countries. We consider the uses and limitations of neutral real interest rates in answering some of the questions that are relevant to monetary policy, and present a range of estimates of the neutral real interest rate for New Zealand.