In relation to other policy dimensions, a low equilibrium real rate reflects – as I discussed earlier – low expected potential growth rates. It follows that growth-enhancing structural policies and growth-optimising public investment rates would translate into an upward shift in the equilibrium real rate.
In addition, population ageing poses many policy challenges, and the policy choices that are made will have significant implications for trend savings and investment rates. In addition, in the event of negative shocks, the speed of convergence back to steady state can be accelerated if macroeconomic stabilisation is supported by counter-cyclical fiscal policies (where feasible) in addition to the stabilisation policies of central banks.