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Australia and the Zero Lower Bound on Interest Rates: Some Monetary Policy Options

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  • Declan Trott

Abstract

This paper argues that Australia needs a contingency plan for monetary policy when interest rates hit zero, and considers various options. Level targeting appears undesirable as a long-run policy due to the lack of an appropriate target variable - prices, wages and nominal GDP all being unsuitable - but may be useful as a temporary expedient. Other possibilities include a higher inflation target and temporary exchange rate targeting.

Suggested Citation

  • Declan Trott, 2015. "Australia and the Zero Lower Bound on Interest Rates: Some Monetary Policy Options," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 22(1), pages 5-20.
  • Handle: RePEc:acb:agenda:v:22:y:2015:i:1:p:5-20
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    File URL: http://press-files.anu.edu.au/downloads/press/p332753/pdf/analysis01.pdf
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