The neutral real interest rate in New Zealand.

Nils Bjorksten, Reserve Bank of New Zealand

Abstract

A striking feature of the NZ economic picture is the persistently high level of real interest rates compared with elsewhere.  We argue that this is because New Zealand has a higher neutral real interest rate, embodying a "New Zealand differential" of up to 200 basis points.  While the neutral real rate appears to have declined over the 1990s in step with similar declines elsewhere, the New Zealand differential has persisted.  Some possible underlying drivers of this differential are discussed.  

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