P. J. Marshall (ed.)
- Published in print:
- 2007
- Published Online:
- January 2012
- ISBN:
- 9780197263945
- eISBN:
- 9780191734038
- Item type:
- book
- Publisher:
- British Academy
- DOI:
- 10.5871/bacad/9780197263945.001.0001
- Subject:
- History, Cultural History
Volume 139 of the Proceedings of the British Academy contains thirteen lectures in the humanities and social sciences delivered at the British Academy in 2005. Subject matter ranges from ...
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Volume 139 of the Proceedings of the British Academy contains thirteen lectures in the humanities and social sciences delivered at the British Academy in 2005. Subject matter ranges from archaeological perspectives on the essence of being human to discussions of the UK's Monetary Policy Committee, the role of judges, and Dame Marilyn Strathern on ‘Useful Knowledge’.Less
Volume 139 of the Proceedings of the British Academy contains thirteen lectures in the humanities and social sciences delivered at the British Academy in 2005. Subject matter ranges from archaeological perspectives on the essence of being human to discussions of the UK's Monetary Policy Committee, the role of judges, and Dame Marilyn Strathern on ‘Useful Knowledge’.
STEPHEN NICKELL
- Published in print:
- 2007
- Published Online:
- January 2012
- ISBN:
- 9780197263945
- eISBN:
- 9780191734038
- Item type:
- chapter
- Publisher:
- British Academy
- DOI:
- 10.5871/bacad/9780197263945.003.0001
- Subject:
- History, Cultural History
This chapter discusses some of the topics the Bank of England Monetary Policy Committee has spent a lot of time on. It first examines the rapid rise in household debt and its implications for ...
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This chapter discusses some of the topics the Bank of England Monetary Policy Committee has spent a lot of time on. It first examines the rapid rise in household debt and its implications for monetary policy. The next section looks at the role of asset prices in monetary policy, with particular reference to the recent UK housing boom. Finally, the chapter discusses the implications of the switch in the inflation target at the end of 2003.Less
This chapter discusses some of the topics the Bank of England Monetary Policy Committee has spent a lot of time on. It first examines the rapid rise in household debt and its implications for monetary policy. The next section looks at the role of asset prices in monetary policy, with particular reference to the recent UK housing boom. Finally, the chapter discusses the implications of the switch in the inflation target at the end of 2003.
Matthew Flinders
- Published in print:
- 2009
- Published Online:
- February 2010
- ISBN:
- 9780199271597
- eISBN:
- 9780191709234
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199271597.003.0014
- Subject:
- Political Science, Comparative Politics, UK Politics
Throughout the twentieth century the view was taken by consecutive governments that the United Kingdom's constitution was incompatible with the concept of central bank independence. New Labour ...
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Throughout the twentieth century the view was taken by consecutive governments that the United Kingdom's constitution was incompatible with the concept of central bank independence. New Labour departed from this position and instead sought to square the circle by granting independence but within the contours of the Westminster Model.Less
Throughout the twentieth century the view was taken by consecutive governments that the United Kingdom's constitution was incompatible with the concept of central bank independence. New Labour departed from this position and instead sought to square the circle by granting independence but within the contours of the Westminster Model.
Andrew Berg and Rafael Portillo
- Published in print:
- 2018
- Published Online:
- April 2018
- ISBN:
- 9780198785811
- eISBN:
- 9780191827624
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198785811.003.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Behavioural Economics
Most countries in sub-Saharan Africa have made great progress in stabilizing inflation over the past two decades. In about half, a hard peg provides the nominal anchor. In the rest, which are the ...
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Most countries in sub-Saharan Africa have made great progress in stabilizing inflation over the past two decades. In about half, a hard peg provides the nominal anchor. In the rest, which are the focus of this book, policymakers have more recently been asking more of monetary policy—to avoid policy misalignments and respond appropriately to shocks such as export and food price spikes and swings in fiscal policy—in support of overall stability and growth. And they are, in many cases, finding current regimes lacking, with opaque and sometimes inconsistent objectives, inadequate transmission of policy to the economy, and difficulties in responding to supply shocks. This chapter reviews this history and the analytic and policy challenges of modernizing monetary policy regimes in the region. Drawing on the results from the rest of this book, it charts a way forward.Less
Most countries in sub-Saharan Africa have made great progress in stabilizing inflation over the past two decades. In about half, a hard peg provides the nominal anchor. In the rest, which are the focus of this book, policymakers have more recently been asking more of monetary policy—to avoid policy misalignments and respond appropriately to shocks such as export and food price spikes and swings in fiscal policy—in support of overall stability and growth. And they are, in many cases, finding current regimes lacking, with opaque and sometimes inconsistent objectives, inadequate transmission of policy to the economy, and difficulties in responding to supply shocks. This chapter reviews this history and the analytic and policy challenges of modernizing monetary policy regimes in the region. Drawing on the results from the rest of this book, it charts a way forward.
Cheryl Schonhardt-Bailey
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780262019576
- eISBN:
- 9780262314725
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262019576.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
American monetary policy is formulated by the Federal Reserve and overseen by Congress. Both policy making and oversight are deliberative processes, although the effect of this deliberation has been ...
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American monetary policy is formulated by the Federal Reserve and overseen by Congress. Both policy making and oversight are deliberative processes, although the effect of this deliberation has been difficult to quantify. This book provides a systematic examination of deliberation on monetary policy from 1976 to 2008 by the Federal Reserve’s Open Market Committee (FOMC) and House and Senate banking committees. The innovative account employs automated textual analysis software to study the verbatim transcripts of FOMC meetings and congressional hearings; these empirical data are supplemented and supported by in-depth interviews with participants in these deliberations. The automated textual analysis measures the characteristic words, phrases, and arguments of committee members; the interviews offer a way to gauge the extent to which the empirical findings accord with the participants’ personal experiences. Decade after decade, Fed chairman after Fed chairman, one feature is evident in the discourse between central bankers and US legislators: Fed chairmen tend to talk about the technicalities of monetary policy while senators and representatives talk about other things, such as jobs, fiscal policy, energy policy, education, and so on. All too often they simply talk past one another. Analyzing why and under what conditions deliberation matters for monetary policy in the FOMC, the book identifies several strategies of persuasion used by committee members, including Paul Volcker’s emphasis on policy credibility and efforts to influence economic expectations.Less
American monetary policy is formulated by the Federal Reserve and overseen by Congress. Both policy making and oversight are deliberative processes, although the effect of this deliberation has been difficult to quantify. This book provides a systematic examination of deliberation on monetary policy from 1976 to 2008 by the Federal Reserve’s Open Market Committee (FOMC) and House and Senate banking committees. The innovative account employs automated textual analysis software to study the verbatim transcripts of FOMC meetings and congressional hearings; these empirical data are supplemented and supported by in-depth interviews with participants in these deliberations. The automated textual analysis measures the characteristic words, phrases, and arguments of committee members; the interviews offer a way to gauge the extent to which the empirical findings accord with the participants’ personal experiences. Decade after decade, Fed chairman after Fed chairman, one feature is evident in the discourse between central bankers and US legislators: Fed chairmen tend to talk about the technicalities of monetary policy while senators and representatives talk about other things, such as jobs, fiscal policy, energy policy, education, and so on. All too often they simply talk past one another. Analyzing why and under what conditions deliberation matters for monetary policy in the FOMC, the book identifies several strategies of persuasion used by committee members, including Paul Volcker’s emphasis on policy credibility and efforts to influence economic expectations.
Cheryl Schonhardt-Bailey and Andrew Bailey
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780262019576
- eISBN:
- 9780262314725
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262019576.003.0004
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter analyses the monetary policy oversight hearings of the two congressional banking committees from 1976 to 2009 (as well as the reconfirmation hearings for Volcker, Greenspan and Bernanke) ...
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This chapter analyses the monetary policy oversight hearings of the two congressional banking committees from 1976 to 2009 (as well as the reconfirmation hearings for Volcker, Greenspan and Bernanke) in order to assess how well Congress holds the Fed to account for its decisions on monetary policy. Surprisingly, partisan ideology plays very little role when it comes to effective monetary policy oversight. Decade after decade, Fed chairman after Fed chairman, one feature is, however, evident in the discourse between central bankers and US legislators: Fed chairmen tend to talk about the technicalities of monetary policy while senators and representatives talk about other things, such jobs, fiscal policy, energy policy, education, and so on. All too often they simply talk past one another.Less
This chapter analyses the monetary policy oversight hearings of the two congressional banking committees from 1976 to 2009 (as well as the reconfirmation hearings for Volcker, Greenspan and Bernanke) in order to assess how well Congress holds the Fed to account for its decisions on monetary policy. Surprisingly, partisan ideology plays very little role when it comes to effective monetary policy oversight. Decade after decade, Fed chairman after Fed chairman, one feature is, however, evident in the discourse between central bankers and US legislators: Fed chairmen tend to talk about the technicalities of monetary policy while senators and representatives talk about other things, such jobs, fiscal policy, energy policy, education, and so on. All too often they simply talk past one another.
Cheryl Schonhardt-Bailey and Andrew Bailey
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780262019576
- eISBN:
- 9780262314725
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262019576.003.0005
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter uses interviews with participants from both the FOMC and congressional banking committees to provide context and understanding of the motivations of central bankers and politicians as ...
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This chapter uses interviews with participants from both the FOMC and congressional banking committees to provide context and understanding of the motivations of central bankers and politicians as they discuss monetary policy. Among the many findings is that deliberation can adjust and alter the preferences of individual FOMC members, though this usually occurs over a series of meetings rather than within the space of a single meeting. With regard to congressional oversight of monetary policy, Congress is perceived to be constrained by specific institutional features—particularly, (1) the electoral incentives of members (which limit their ability and time to learn from deliberation), (2) the lack of technical expertise in monetary policy, (3) the extreme transparency of the oversight hearings, and (4) the large membership size of the House and Senate banking committees. In short, the finding is that Congress as an institution for holding monetary policy makers to account is limited at best.Less
This chapter uses interviews with participants from both the FOMC and congressional banking committees to provide context and understanding of the motivations of central bankers and politicians as they discuss monetary policy. Among the many findings is that deliberation can adjust and alter the preferences of individual FOMC members, though this usually occurs over a series of meetings rather than within the space of a single meeting. With regard to congressional oversight of monetary policy, Congress is perceived to be constrained by specific institutional features—particularly, (1) the electoral incentives of members (which limit their ability and time to learn from deliberation), (2) the lack of technical expertise in monetary policy, (3) the extreme transparency of the oversight hearings, and (4) the large membership size of the House and Senate banking committees. In short, the finding is that Congress as an institution for holding monetary policy makers to account is limited at best.
Cheryl Schonhardt-Bailey and Andrew Bailey
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780262019576
- eISBN:
- 9780262314725
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262019576.003.0003
- Subject:
- Economics and Finance, Macro- and Monetary Economics
The first part of this chapter analyses FOMC transcripts from 1979-99, finding shifts in the substance and style of deliberation, and a shift in the contributions of governors and reserve bank ...
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The first part of this chapter analyses FOMC transcripts from 1979-99, finding shifts in the substance and style of deliberation, and a shift in the contributions of governors and reserve bank presidents. Part two focuses on the case of the Volcker Revolution in 1979, and the subsequent years of 1980-81. Textual analysis reveals a crucial role for Paul Volcker as chairman in laying out, and subsequently modifying, a major change in policy that enabled colleagues with quite disparate views on the objective and immediate setting of policy to coalesce around Volcker’s position. Part three of this chapter examines monetary policy making in 1999, twenty years after the Volcker Revolution. Persuasion plays a role in FOMC deliberation in that members adopt clear strategies of persuasion (e.g., cumulative argumentation around a consistent theme; emphasis on new argumentation; and explicit evidence-based argumentation where the consistent theme is more implicit).Less
The first part of this chapter analyses FOMC transcripts from 1979-99, finding shifts in the substance and style of deliberation, and a shift in the contributions of governors and reserve bank presidents. Part two focuses on the case of the Volcker Revolution in 1979, and the subsequent years of 1980-81. Textual analysis reveals a crucial role for Paul Volcker as chairman in laying out, and subsequently modifying, a major change in policy that enabled colleagues with quite disparate views on the objective and immediate setting of policy to coalesce around Volcker’s position. Part three of this chapter examines monetary policy making in 1999, twenty years after the Volcker Revolution. Persuasion plays a role in FOMC deliberation in that members adopt clear strategies of persuasion (e.g., cumulative argumentation around a consistent theme; emphasis on new argumentation; and explicit evidence-based argumentation where the consistent theme is more implicit).
Cheryl Schonhardt-Bailey and Andrew Bailey
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780262019576
- eISBN:
- 9780262314725
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262019576.003.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics
This chapter sets out the aim of the book—to examine systematically deliberation on monetary policy in the U.S. in two different institutions, the Federal Reserve and Congress. It establishes reasons ...
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This chapter sets out the aim of the book—to examine systematically deliberation on monetary policy in the U.S. in two different institutions, the Federal Reserve and Congress. It establishes reasons why deliberation may matter in US monetary policy. For instance, even though the legal framework for the independence of the Fed has remained constant, (1) interpretations of this independence among policy makers and politicians have changed considerably — and so it may be important to gauge how their thinking and arguments on this have evolved; (2) policy makers do not generally envisage their decisions on monetary policy as falling along a single dimension, and so there are potential trade-offs to be made across dimensions, which may entail argued reasoning; (3) the uncertainty inherent to monetary policy decision making creates questions that in turn create the opportunity for deliberation; (4) studying the Fed and Congress together allows us insight into the ways in which each institutional setting shapes the ways that monetary policy is understood and discussed; and (5) studying deliberation provides insight into the effects of changes in transparency and the chairman’s leadership on the committees’ discussions.Less
This chapter sets out the aim of the book—to examine systematically deliberation on monetary policy in the U.S. in two different institutions, the Federal Reserve and Congress. It establishes reasons why deliberation may matter in US monetary policy. For instance, even though the legal framework for the independence of the Fed has remained constant, (1) interpretations of this independence among policy makers and politicians have changed considerably — and so it may be important to gauge how their thinking and arguments on this have evolved; (2) policy makers do not generally envisage their decisions on monetary policy as falling along a single dimension, and so there are potential trade-offs to be made across dimensions, which may entail argued reasoning; (3) the uncertainty inherent to monetary policy decision making creates questions that in turn create the opportunity for deliberation; (4) studying the Fed and Congress together allows us insight into the ways in which each institutional setting shapes the ways that monetary policy is understood and discussed; and (5) studying deliberation provides insight into the effects of changes in transparency and the chairman’s leadership on the committees’ discussions.
Marc Flandreau
- Published in print:
- 2004
- Published Online:
- August 2004
- ISBN:
- 9780199257867
- eISBN:
- 9780191601279
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/0199257868.003.0006
- Subject:
- Economics and Finance, Economic History
Chapter 5 studies the rules of bimetallic game. It discusses the constraints and opportunities of bimetallic regimes for monetary authorities. It shows that, contrary to a widespread view, a ...
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Chapter 5 studies the rules of bimetallic game. It discusses the constraints and opportunities of bimetallic regimes for monetary authorities. It shows that, contrary to a widespread view, a bimetallic system does not provide fundamentally different opportunities than a monometallic one, and thus places fairly tight constraints upon monetary authorities. In fact, it is during the years of bimetallism that a high degree of European monetary integration was first achieved.Less
Chapter 5 studies the rules of bimetallic game. It discusses the constraints and opportunities of bimetallic regimes for monetary authorities. It shows that, contrary to a widespread view, a bimetallic system does not provide fundamentally different opportunities than a monometallic one, and thus places fairly tight constraints upon monetary authorities. In fact, it is during the years of bimetallism that a high degree of European monetary integration was first achieved.
Sigbjørn Atle Berg and Øyvind Eitrheim
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018340
- eISBN:
- 9780262305921
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018340.003.0011
- Subject:
- Economics and Finance, Financial Economics
Norway was, like many small open economies, adversely affected by the recession that followed the global financial crisis. But in an international perspective, the Norwegian economy and institutions ...
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Norway was, like many small open economies, adversely affected by the recession that followed the global financial crisis. But in an international perspective, the Norwegian economy and institutions were less affected by the crisis than many other countries. Norway's approach to monetary policy, flexible inflation targeting, was already in place when the crisis hit, and it benefitted from having established a credible and transparent framework for communication of Norges Bank's policy intentions. One lesson was that monetary policy is more than setting the policy rate. Appropriate and adequate liquidity measures were required to improve the functioning of the financial markets. The international experience shows that inflation targeting per se is not sufficient, neither for price stability nor for financial stability. Although Norway benefited from lessons from the Nordic financial crisis in the 1990s, the recent crisis revealed weaknesses in the policy framework for financial stability, suggesting a need to look creatively for macroprudential instruments, and improvements in the resolution regime for troubled banks. Flexible inflation targeting proved to be a robust framework for monetary policy during the crisis, and successfully provided the necessary room for maneuver for Norges Bank in its pursuit of price stability and financial stability.Less
Norway was, like many small open economies, adversely affected by the recession that followed the global financial crisis. But in an international perspective, the Norwegian economy and institutions were less affected by the crisis than many other countries. Norway's approach to monetary policy, flexible inflation targeting, was already in place when the crisis hit, and it benefitted from having established a credible and transparent framework for communication of Norges Bank's policy intentions. One lesson was that monetary policy is more than setting the policy rate. Appropriate and adequate liquidity measures were required to improve the functioning of the financial markets. The international experience shows that inflation targeting per se is not sufficient, neither for price stability nor for financial stability. Although Norway benefited from lessons from the Nordic financial crisis in the 1990s, the recent crisis revealed weaknesses in the policy framework for financial stability, suggesting a need to look creatively for macroprudential instruments, and improvements in the resolution regime for troubled banks. Flexible inflation targeting proved to be a robust framework for monetary policy during the crisis, and successfully provided the necessary room for maneuver for Norges Bank in its pursuit of price stability and financial stability.
Jacob Braude, Zvi Eckstein, Stanley Fischer, and Karnit Flug (eds)
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018340
- eISBN:
- 9780262305921
- Item type:
- book
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018340.001.0001
- Subject:
- Economics and Finance, Financial Economics
The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. ...
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The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. Following the collapse of Lehman Brothers in September 2008, governments and central banks acted on an unprecedented scope and scale. The policy response was unique in the variety of the measures taken, including some that had so far been almost unthinkable. Examples include unconventional monetary policy, interventions in financial markets, exchange rate intervention, and a renewed debate on capital controls. Preventive policies for reducing the risk of a crisis were also reconsidered, notably macroprudential policies, and stronger regulation of financial markets and institutions. The volume is policy oriented and presents the experience of various countries − advanced economies and emerging ones, countries that were hard-hit by the crisis and countries that weathered it successfully. The focus on central banks reflects the important role they played during the crisis, and the role that they might play in preventing or preparing for future crises. The chapters cover primarily monetary policy, macroprudential policy, and issues of exchange rates, capital flows, banking and financial markets as these relate to the crisis and its lessons. They also highlight the interactions among these dimensions, as the need for integration among policy areas is one of the important lessons of the crisis. This calls for closer cooperation and coordination between the various policy makers and regulators.Less
The Great Recession shook not only the global economy and the financial systems of major economies, but also conventional wisdom of economic policy making, regulation of financial markets, and more. Following the collapse of Lehman Brothers in September 2008, governments and central banks acted on an unprecedented scope and scale. The policy response was unique in the variety of the measures taken, including some that had so far been almost unthinkable. Examples include unconventional monetary policy, interventions in financial markets, exchange rate intervention, and a renewed debate on capital controls. Preventive policies for reducing the risk of a crisis were also reconsidered, notably macroprudential policies, and stronger regulation of financial markets and institutions. The volume is policy oriented and presents the experience of various countries − advanced economies and emerging ones, countries that were hard-hit by the crisis and countries that weathered it successfully. The focus on central banks reflects the important role they played during the crisis, and the role that they might play in preventing or preparing for future crises. The chapters cover primarily monetary policy, macroprudential policy, and issues of exchange rates, capital flows, banking and financial markets as these relate to the crisis and its lessons. They also highlight the interactions among these dimensions, as the need for integration among policy areas is one of the important lessons of the crisis. This calls for closer cooperation and coordination between the various policy makers and regulators.
Xavier Freixas, Luc Laeven, and José-Luis Peydró
- Published in print:
- 2015
- Published Online:
- September 2016
- ISBN:
- 9780262028691
- eISBN:
- 9780262328609
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262028691.003.0010
- Subject:
- Economics and Finance, Public and Welfare
This chapter analyzes monetary policy and systemic risk, and the interrelation with macroprudential policy. It analyzes the role of monetary policy to reduce ex-ante build-up of financial imbalances ...
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This chapter analyzes monetary policy and systemic risk, and the interrelation with macroprudential policy. It analyzes the role of monetary policy to reduce ex-ante build-up of financial imbalances by leaning against the wind and to combat ex-post credit crunches and fire sales in asset prices. It discusses also the importance of short versus long term interest rates for financial institutions, notably banks. It explains the risk-taking channel of monetary policy, its relation with the credit channel, and summarizes the empirical evidence around the world on these channels. Moreover, the chapter explains that, as monetary policy affects credit and asset prices (thus influencing systemic risk), coordination between monetary and macroprudential policy is key. It also describes how macroprudential policy and its objective of financial stability could be in conflict with the price stability objective of monetary policy.Less
This chapter analyzes monetary policy and systemic risk, and the interrelation with macroprudential policy. It analyzes the role of monetary policy to reduce ex-ante build-up of financial imbalances by leaning against the wind and to combat ex-post credit crunches and fire sales in asset prices. It discusses also the importance of short versus long term interest rates for financial institutions, notably banks. It explains the risk-taking channel of monetary policy, its relation with the credit channel, and summarizes the empirical evidence around the world on these channels. Moreover, the chapter explains that, as monetary policy affects credit and asset prices (thus influencing systemic risk), coordination between monetary and macroprudential policy is key. It also describes how macroprudential policy and its objective of financial stability could be in conflict with the price stability objective of monetary policy.
Huw Pill and Frank Smets
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018340
- eISBN:
- 9780262305921
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018340.003.0002
- Subject:
- Economics and Finance, Financial Economics
In the eyes of some, the great financial crisis has raised questions about whether price-stability oriented monetary policy frameworks – that, until only a few years ago, were credited with ...
More
In the eyes of some, the great financial crisis has raised questions about whether price-stability oriented monetary policy frameworks – that, until only a few years ago, were credited with supporting a long period of global economic stability – remain appropriate. This chapter evaluates these claims on the basis of the ECB's experience. It argues that: (a) nonstandard policy measures targeted at repairing malfunctioning markets are potentially more efficient instruments to address financial crisis than reducing policy rates to their lower bound. By tackling malfunctioning financial markets directly and re-establishing monetary policy transmission, such measures enhance the effectiveness of the standard interest rate policy instrument and thus serve to achieve macro-stabilisation without inducing greater interest rate volatility; (b) a solid anchoring of inflation expectations stemming from the establishment of credible price stability-oriented policy frameworks has played a crucial role during the crisis, both as an automatic stabiliser and in preventing the emergence of a debt-deflation spiral; (c) analysis of monetary developments helps identify the excessive credit expansion underlying the creation of financial imbalances. All in all, the chapter concludes that the conduct of monetary policy should neither be changed fundamentally nor overburdened with additional objectives.Less
In the eyes of some, the great financial crisis has raised questions about whether price-stability oriented monetary policy frameworks – that, until only a few years ago, were credited with supporting a long period of global economic stability – remain appropriate. This chapter evaluates these claims on the basis of the ECB's experience. It argues that: (a) nonstandard policy measures targeted at repairing malfunctioning markets are potentially more efficient instruments to address financial crisis than reducing policy rates to their lower bound. By tackling malfunctioning financial markets directly and re-establishing monetary policy transmission, such measures enhance the effectiveness of the standard interest rate policy instrument and thus serve to achieve macro-stabilisation without inducing greater interest rate volatility; (b) a solid anchoring of inflation expectations stemming from the establishment of credible price stability-oriented policy frameworks has played a crucial role during the crisis, both as an automatic stabiliser and in preventing the emergence of a debt-deflation spiral; (c) analysis of monetary developments helps identify the excessive credit expansion underlying the creation of financial imbalances. All in all, the chapter concludes that the conduct of monetary policy should neither be changed fundamentally nor overburdened with additional objectives.
Andrew Berg and Rafael Portillo (eds)
- Published in print:
- 2018
- Published Online:
- April 2018
- ISBN:
- 9780198785811
- eISBN:
- 9780191827624
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198785811.001.0001
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Behavioural Economics
Having broadly stabilized inflation over the past two decades, many policymakers in sub-Saharan Africa are now asking more of their monetary policy frameworks. They are looking to avoid policy ...
More
Having broadly stabilized inflation over the past two decades, many policymakers in sub-Saharan Africa are now asking more of their monetary policy frameworks. They are looking to avoid policy misalignments and respond appropriately to both domestic and external shocks, including swings in fiscal policy and spikes in food and export prices. In many cases they are finding current regimes—often characterized as ‘money targeting’—lacking, with opaque and sometimes inconsistent objectives, inadequate transmission of policy to the economy, and difficulties in responding to supply shocks. At the same time, little existing research on monetary policy is targeted to low-income countries. What do we know about the empirics of monetary transmission in low-income countries? (How) Does monetary policy work in countries characterized by a huge share of food in consumption, underdeveloped financial markets, and opaque policy regimes? (How) Can we use methods largely derived in advanced countries to answer these questions? And (how) can we use the results to guide policymakers? This book draws on years of research and practice at the IMF and in central banks from the region to shed empirical and theoretical light on these questions and to provide practical tools and policy guidance. A key feature of the book is the application of dynamic general equilibrium models, suitably adapted to reflect key features of low-income countries, for the analysis of monetary policy in sub-Saharan African countries.Less
Having broadly stabilized inflation over the past two decades, many policymakers in sub-Saharan Africa are now asking more of their monetary policy frameworks. They are looking to avoid policy misalignments and respond appropriately to both domestic and external shocks, including swings in fiscal policy and spikes in food and export prices. In many cases they are finding current regimes—often characterized as ‘money targeting’—lacking, with opaque and sometimes inconsistent objectives, inadequate transmission of policy to the economy, and difficulties in responding to supply shocks. At the same time, little existing research on monetary policy is targeted to low-income countries. What do we know about the empirics of monetary transmission in low-income countries? (How) Does monetary policy work in countries characterized by a huge share of food in consumption, underdeveloped financial markets, and opaque policy regimes? (How) Can we use methods largely derived in advanced countries to answer these questions? And (how) can we use the results to guide policymakers? This book draws on years of research and practice at the IMF and in central banks from the region to shed empirical and theoretical light on these questions and to provide practical tools and policy guidance. A key feature of the book is the application of dynamic general equilibrium models, suitably adapted to reflect key features of low-income countries, for the analysis of monetary policy in sub-Saharan African countries.
Harun Alp and Selim Elekdağ
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018340
- eISBN:
- 9780262305921
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018340.003.0003
- Subject:
- Economics and Finance, Financial Economics
Turkey is an interesting case study because it was one of the hardest hit countries by the crisis, with a year-over-year contraction of 15 percent during the first quarter of 2009. At the same time, ...
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Turkey is an interesting case study because it was one of the hardest hit countries by the crisis, with a year-over-year contraction of 15 percent during the first quarter of 2009. At the same time, anticipating this fallout from the crisis, the Central Bank of the Republic of Turkey (CBRT) cut policy rates by an astounding 1025 basis points over November 2008–November 2009. In this context, this chapter addresses the following question: If an inflation targeting framework underpinned by a flexible exchange rate regime was not adopted, how much deeper would the recession have been? Counterfactual experiments based on an estimated structural model provide quantitative evidence which suggests that the recession would have been substantially more severe. In other words, the combination of exchange rate flexibility and the interest rate cuts implemented by the CBRT substantially helped soften the impact of the crisis.Less
Turkey is an interesting case study because it was one of the hardest hit countries by the crisis, with a year-over-year contraction of 15 percent during the first quarter of 2009. At the same time, anticipating this fallout from the crisis, the Central Bank of the Republic of Turkey (CBRT) cut policy rates by an astounding 1025 basis points over November 2008–November 2009. In this context, this chapter addresses the following question: If an inflation targeting framework underpinned by a flexible exchange rate regime was not adopted, how much deeper would the recession have been? Counterfactual experiments based on an estimated structural model provide quantitative evidence which suggests that the recession would have been substantially more severe. In other words, the combination of exchange rate flexibility and the interest rate cuts implemented by the CBRT substantially helped soften the impact of the crisis.
Niv Horesh
- Published in print:
- 2013
- Published Online:
- September 2014
- ISBN:
- 9780804787192
- eISBN:
- 9780804788540
- Item type:
- book
- Publisher:
- Stanford University Press
- DOI:
- 10.11126/stanford/9780804787192.001.0001
- Subject:
- Economics and Finance, Economic History
This book offers an interpretation of the Chinese monetary system, charting its evolution by examining key moments in history – from BCE 600 up to the present. It places these moments in ...
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This book offers an interpretation of the Chinese monetary system, charting its evolution by examining key moments in history – from BCE 600 up to the present. It places these moments in international perspective by comparing primary sources in multiple languages and across three millennia. The book begins exploring the trajectory of Chinese currency at the birth of coinage around the world and ends with the implications of the current global financial crisis for China and the rest of the world. Its narrative highlights the way that Chinese money developed in relation to the currencies of other countries, paying special attention to the origins of paper money, the relationship between the West’s ascendancy and its mineral riches, the linkages between pre-modern finance, debasement, and then inflation with the emergence of nation-statehood. The book then looks ahead to the possible globalization of the RMB, the currency of the People’s Republic of China against the backdrop of growing global uncertainties as to America’s federal debt.Less
This book offers an interpretation of the Chinese monetary system, charting its evolution by examining key moments in history – from BCE 600 up to the present. It places these moments in international perspective by comparing primary sources in multiple languages and across three millennia. The book begins exploring the trajectory of Chinese currency at the birth of coinage around the world and ends with the implications of the current global financial crisis for China and the rest of the world. Its narrative highlights the way that Chinese money developed in relation to the currencies of other countries, paying special attention to the origins of paper money, the relationship between the West’s ascendancy and its mineral riches, the linkages between pre-modern finance, debasement, and then inflation with the emergence of nation-statehood. The book then looks ahead to the possible globalization of the RMB, the currency of the People’s Republic of China against the backdrop of growing global uncertainties as to America’s federal debt.
Tony Prosser
- Published in print:
- 2014
- Published Online:
- April 2014
- ISBN:
- 9780199644537
- eISBN:
- 9780191747816
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199644537.003.0006
- Subject:
- Law, Company and Commercial Law, Constitutional and Administrative Law
This chapter describes the role of the Bank of England in monetary policy; there is also coverage of the role of the European Central Bank. It concentrates on the role of the Bank’s Monetary Policy ...
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This chapter describes the role of the Bank of England in monetary policy; there is also coverage of the role of the European Central Bank. It concentrates on the role of the Bank’s Monetary Policy Committee in setting interest rates and undertaking quantitative easing. Particular attention is paid to the remit of the Committee, its relations with the Treasury and its accountability to Parliament. It is argued that the arrangements for an independent Committee with a defined remit have significantly increased transparency and accountability, but this will be more difficult to employ when difficult trade-offs have to be made between control of inflation and other values, in the field of monetary policy and elsewhere.Less
This chapter describes the role of the Bank of England in monetary policy; there is also coverage of the role of the European Central Bank. It concentrates on the role of the Bank’s Monetary Policy Committee in setting interest rates and undertaking quantitative easing. Particular attention is paid to the remit of the Committee, its relations with the Treasury and its accountability to Parliament. It is argued that the arrangements for an independent Committee with a defined remit have significantly increased transparency and accountability, but this will be more difficult to employ when difficult trade-offs have to be made between control of inflation and other values, in the field of monetary policy and elsewhere.
Ali Alichi, Marshall Mills, Douglas Laxton, and Hans Weisfeld
- Published in print:
- 2018
- Published Online:
- April 2018
- ISBN:
- 9780198785811
- eISBN:
- 9780191827624
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198785811.003.0019
- Subject:
- Economics and Finance, Macro- and Monetary Economics, Behavioural Economics
A model in which monetary policy pursues fully fledged inflation targeting is adapted to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a ...
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A model in which monetary policy pursues fully fledged inflation targeting is adapted to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a policy loss function that aims to minimize the variability of output and the interest rate, as well as deviations of inflation from the long-term low-inflation target. The optimal approach from initial high inflation to the ultimate target is gradual; and transitional inflation-reduction objectives are flexible. Over time, as policy earns credibility, expectations of inflation converge towards the long-run target, the output-inflation variability trade-off improves, and optimal policy responses to shocks moderate.Less
A model in which monetary policy pursues fully fledged inflation targeting is adapted to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a policy loss function that aims to minimize the variability of output and the interest rate, as well as deviations of inflation from the long-term low-inflation target. The optimal approach from initial high inflation to the ultimate target is gradual; and transitional inflation-reduction objectives are flexible. Over time, as policy earns credibility, expectations of inflation converge towards the long-run target, the output-inflation variability trade-off improves, and optimal policy responses to shocks moderate.
Carlos Capistrán, Gabriel Cuadra, and Manuel Ramos-Francia
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018340
- eISBN:
- 9780262305921
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018340.003.0009
- Subject:
- Economics and Finance, Financial Economics
Emerging economies have been subject to abrupt reversals in capital flows, which have adverse consequences for economic activity and financial stability. An important question for policymakers is how ...
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Emerging economies have been subject to abrupt reversals in capital flows, which have adverse consequences for economic activity and financial stability. An important question for policymakers is how to respond to a sudden loss of external financing and its negative effects on the domestic economy. The experience of emerging economies throughout the recent financial crisis shows that those economies with relatively better economic fundamentals were able to implement countercyclical policies. This chapter provides a simple analytical framework to rationalize this evidence. In particular, it addresses this issue by developing a small-scale macroeconomic model of the New-Keynesian type. Numerical exercises illustrate how both credible monetary and fiscal policies increase policymakers’ degrees of freedom to respond to adverse external shocks.Less
Emerging economies have been subject to abrupt reversals in capital flows, which have adverse consequences for economic activity and financial stability. An important question for policymakers is how to respond to a sudden loss of external financing and its negative effects on the domestic economy. The experience of emerging economies throughout the recent financial crisis shows that those economies with relatively better economic fundamentals were able to implement countercyclical policies. This chapter provides a simple analytical framework to rationalize this evidence. In particular, it addresses this issue by developing a small-scale macroeconomic model of the New-Keynesian type. Numerical exercises illustrate how both credible monetary and fiscal policies increase policymakers’ degrees of freedom to respond to adverse external shocks.
