That’s true for businesses, governments and central banks. It is in light of both economic theory and recent global experience that we have been assessing what alternative monetary policy tools may be available to the Reserve Bank of New Zealand – and their relative desirability. We are fortunate, unlike many other OECD economies, to have the time to prepare for such possible needs.
The work we have been pursuing has involved: • Identifying the suite of possible ‘unconventional monetary policy tools’ available to us; • Defining and making explicit the criteria we would assess these tools with, against both each other and also alternative policies all together (e.g., fiscal policy options); • Considering the relative benefits and costs of the tools, so as to operate on a ‘least surprise’ basis, and to ensure we are working in collaboration and with the agreement of the fiscal authorities; • Considering not just the monetary policy efficacy of the tools, but also broader considerations related to our financial stability and efficiency mandate; and • Ensuring the tools are actually able to be utilised, including working with the important financial institutions that make up our system.