Zeroing in on the limitations of monetary policy

In Australia and abroad, neutral cash rates have tumbled as economic optimism and growth remain subdued. Central banks are only just getting used to the 'new normal' and its consequences for policy.

Is the Reserve Bank of Australia concerned about the zero lower bound and the limitations of conventional monetary policy? Recent comments by RBA governor Glenn Stevens suggest he has plenty on his mind.

Following the global financial crisis, monetary policy changed forever. Decades of conventional policy was turned on its head once Lehman Brothers collapsed and financial markets across the world threatened to follow suit.


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