scholarly journals MONETARY POLICY IMPLEMENTATION FRAMEWORKS: A COMPARATIVE ANALYSIS

2010 ◽  
Vol 15 (S1) ◽  
pp. 145-189 ◽  
Author(s):  
Antoine Martin ◽  
Cyril Monnet
Keyword(s):  
Monetary Policy ◽  
Comparative Analysis ◽  
Policy Implementation ◽  
Central Bank ◽  
Open Market ◽  
Implementation Framework ◽  
Friedman Rule ◽  
Excess Reserves ◽  
Implementation Of Monetary Policy

We compare two stylized frameworks for the implementation of monetary policy. The first framework relies only on standing facilities, whereas the second framework relies only on open-market operations. We show that the Friedman rule cannot be implemented when the central bank uses standing facilities only. For a given rate of inflation, we show that standing facilities unambiguously achieve higher welfare than just conducting open-market operations. We conclude that elements of both frameworks should be combined. Also, our results suggest that any monetary policy implementation framework should remunerate both required and excess reserves.

scholarly journals Demand for Central Bank Reserves and Monetary Policy Implementation Frameworks: The Case of the Eurosystem

2021 ◽  
Author(s):  
Pontus Åberg ◽  
Marco Corsi ◽  
Vincent Grossmann-Wirth ◽  
Tom Hudepohl ◽  
Yvo Mudde ◽  
...  
Keyword(s):  
Monetary Policy ◽  
Policy Implementation ◽  
Central Bank ◽  
Bank Reserves

scholarly journals Over- and Underbidding in Central Bank Open Market Operations Conducted as Fixed Rate Tender

2005 ◽  
Vol 6 (1) ◽  
pp. 95-130 ◽  
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Banking System ◽  
Central Banks ◽  
General Question ◽  
Open Market ◽  
Short Term ◽  
Fixed Rate ◽  
Proposed Model

Abstract Open market operations play a key role in allocating central bank funds to the banking system and thereby in steering short-term interest rates in line with the stance of monetary policy. Many central banks apply so-called ‘fixed rate tender’ auctions in their open market operations. This paper presents, on the basis of a survey of central bank experience, a model of bidding in such tenders. In their conduct of fixed rate tenders, many central banks faced specifically an ‘under-’ and an ‘overbidding’ problem. These phenomena are revisited in the light of the proposed model, and the more general question of the optimal tender procedure and allotment policy of central banks is addressed.

scholarly journals Excess reserves and monetary policy implementation

2017 ◽  
Vol 23 ◽  
pp. 212-235 ◽  
Author(s):  
Roc Armenter ◽  
Benjamin Lester
Keyword(s):  
Monetary Policy ◽  
Policy Implementation ◽  
Excess Reserves

scholarly journals Let's close the gap: Revising teaching materials to reflect how the Federal Reserve implements monetary policy

2020 ◽  
Vol 2020 (089) ◽  
pp. 1-49
Author(s):  
Jane Ihrig ◽  
◽  
Scott Wolla ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Banking System ◽  
Implementation Framework ◽  
Teaching Resources ◽  
The Past ◽  
Standards And Guidelines ◽  
Implementation Of Monetary Policy ◽  
Dual Mandate ◽  
The Way

The topic of the Federal Reserve’s (the Fed’s) implementation of monetary policy has a significant presence in economics textbooks as well as standards and guidelines for economics instruction. This presence likely reflects the fact that it is the implementation framework that helps ensure that the Fed’s desired level of its policy interest rate is transmitted to financial markets, which helps it steer the economy toward the Congressional dual mandate of maximum employment and price stability. Over the past decade or so, the Fed has purposefully shifted the way it implements monetary policy to an environment with ample reserves in the banking system, and it has introduced new policy tools along the way. This paper shows that, unfortunately, many teaching resources are not in sync with the Fed’s current framework. We review six, 2020 or 2021 edition, principles of economics textbooks, and we find they vary greatly in their coverage of the concepts associated with the way the Fed implements policy today and in the longer run. We provide recommendations on how the authors can improve the next editions of their textbooks. We also review standards and guidelines used by secondaryschool educators. All of these are out of date, and we provide proposals for how these materials can be updated.

scholarly journals Development of Electronic Money and Its Impact on the Central Bank Role and Monetary Policy

10.28945/3328 ◽  
2009 ◽  
Author(s):  
Mohamad Al-Laham ◽  
Haroon Al-Tarawneh ◽  
Najwan Abdallat
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Computer Network ◽  
Electronic Device ◽  
Fiscal Policies ◽  
Electronic Money ◽  
Primary Means ◽  
Implementation Of Monetary Policy ◽  
Bank Reserves ◽  
Network Good

In recent years there has been considerable interest in the development of electronic money schemes. Electronic money has the potential to take over from cash as the primary means of making small-value payments and could make such transactions easier and cheaper for both consumers and merchants. Electronic money is a record of the funds or "value" available to a consumer stored on an electronic device in his or her possession, either on a prepaid card or on a personal computer for use over a computer network such as the Internet. This paper argues that e-money, as a network good, could become an important form of currency in the future. Such a development would influence the effectiveness and implementation of monetary policy. If an increased use of e-money substantially limits demand for central bank reserves, it would require changes in the operational target of the central bank and a closer coordination of monetary and fiscal policies.

Central Bank Communications

2019 ◽  
pp. 262-286
Author(s):  
J. Scott Davis ◽  
Mark A. Wynne
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Open Market ◽  
Monetary Policy Shocks ◽  
Federal Open Market Committee ◽  
Quarter Century ◽  
The Past ◽  
Policy Shocks ◽  
Monetary Policy Shock ◽  
Daily Time

Over the past twenty-five years, central bank communications have undergone a major revolution. Central banks that previously shrouded themselves in mystery now embrace social media to get their message out to the widest audience. The volume of information about monetary policy that the Federal Open Market Committee (FOMC) now releases dwarfs what it was releasing a quarter century ago. This chapter focuses on just one channel of FOMC communications, the postmeeting statement. It documents how this has become more detailed over time. Then daily financial-market data are used to estimate a daily time series of US monetary policy shocks. These shocks on Fed statement release days have gotten larger as the statement has gotten longer and more detailed, and the chapter shows that the length and complexity of the statement have a direct effect on the size of the monetary policy shock following a Fed decision.

scholarly journals Excess reserves and the implementation of monetary policy of the ECB

2006 ◽  
Vol 28 (5) ◽  
pp. 491-510 ◽  
Author(s):  
Ulrich Bindseil ◽  
Gonzalo Camba-Mendez ◽  
Astrid Hirsch ◽  
Benedict Weller
Keyword(s):  
Monetary Policy ◽  
Excess Reserves ◽  
Implementation Of Monetary Policy

Liquidity, Monetary Policy, and the Financial Crisis: A New Monetarist Approach

2012 ◽  
Vol 102 (6) ◽  
pp. 2570-2605 ◽  
Author(s):  
Stephen D Williamson
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Financial Frictions ◽  
Open Market ◽  
Public And Private ◽  
Liquidity Trap ◽  
Friedman Rule ◽  
Crisis Phenomenon ◽  
Asset Purchases

A model of public and private liquidity integrates financial intermediation theory with a New Monetarist monetary framework. Non-passive fiscal policy and costs of operating a currency system imply that an optimal policy deviates from the Friedman rule. A liquidity trap can exist in equilibrium away from the Friedman rule, and there exists a permanent nonneutrality of money, driven by an illiquidity effect. Financial frictions can produce a financial-crisis phenomenon that can be mitigated by conventional open market operations working in an unconventional manner. Private asset purchases by the central bank are either irrelevant or they reallocate credit and redistribute income. (JEL E13, E44, E52, E62, G01)

scholarly journals Excess Reserves and the Implementation of Monetary Policy of the ECB

2004 ◽  
Author(s):  
Ulrich Bindseil ◽  
Gonzalo Camba-Mendez ◽  
Astrid Hirsch ◽  
Benedict Weller
Keyword(s):  
Monetary Policy ◽  
Excess Reserves ◽  
Implementation Of Monetary Policy

scholarly journals A Central Banks Role In Cashless Payments

2012 ◽  
Vol 11 (7) ◽  
pp. 827
Author(s):  
Tobias Duemmler ◽  
Stephan Kienle
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Economies Of Scale ◽  
Optimal Solution ◽  
Central Banks ◽  
Welfare Effects ◽  
Payment Systems ◽  
Systemic Risks ◽  
Implementation Of Monetary Policy

The smooth functioning of payment systems is relevant for both the efficiency of the financial sector as well as the implementation of monetary policy operations. Therefore, payment systems are often provided by central banks. The characteristics of individual payment systems, such as increasing economies of scale, favour the development of a monopolistic situation. Therefore, we consider the role of a central bank acting as a monopolist and discuss possible welfare effects. Against the background of huge systemic risks, a central bank acting as an operator of an individual payment system is supposed to be the optimal solution. We illustrate our findings in the light of the role of the Bundesbank which has traditionally been operating its own payment systems.

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