The Reserve Bank instituted a core funding ratio primarily to strengthen the resilience of the banking system.
But raising the ratio increases the banks' cost of funds. It means the official cash rate does not have to work as hard to deliver a given level of mortgage and business lending rates, keeping the OCR and wholesale interest rates lower.
That reduces the attractiveness to international investors of parking funds in New Zealand and thereby relieves pressure on the exchange rate.
Other macro-prudential tools under consideration include regulating loan-to-value ratios for mortgage loans, and requiring banks to maintain counter-cyclical capital buffers.
Concern that the monetary policy framework regularly delivers an overvalued exchange rate is longstanding and currently well-founded, Lees says, citing work by US economists William Cline and John Williamson. That has placed New Zealand among the top three overvalued currencies, among 34 they look at, in each of the past three years.
"Right now the exchange rate is high for both fundamental reasons (New Zealand's economy is outperforming advanced economies like the US) and non-fundamental reasons (governments buying New Zealand dollars to sit in foreign reserves rather than investing in the real economy)."
Macro-prudential tools could limit exchange rate movements that are not based on fundamentals.
"There is currently a risk that some future government will succumb to the clamour to 'do something' about the high exchange rate, and ends up doing something silly," Lees said.
"The introduction of macro-prudential tools gives an opportunity to soften the link between the interest and exchange rates by being able to target financial asset bubbles directly."