Central bank collateral as a green monetary policy instrument

The outbreak of the COVID-19 pandemic has caused an upsurge economic policy uncertainty (EPU). Study on the time-varying effect of EPU is of substantial implication for the central bank in implementation of monetary policy. To empirically investigate the time-varying effect of EPU, the paper considers the shock of the monetary policy implemented by China's central bank on different economic variables including interest rate, output gap, and inflationary gap using the latent threshold time-varying parameter vector autoregressive model (LT-TVP-VAR Model). Data period is chosen to be January 2015 through April 2021. Our findings show that (i) EPU has a significant threshold effect on the shock of quantitative monetary policy instrument and the shock of price-based monetary policy, and that the two types of policy are positively correlated; (ii) the price-based monetary policy instrument has a significant counter-cyclical effect on both output gap and inflationary gap; (iii) relative to the quantitative monetary policy instrument, the price-based monetary policy instrument has a more significant counter-cyclical effect on output gap; and (iv) a higher level of EPU is associated with a more significant monetary policy effect on output gap and inflationary gap.

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Debt-Sale Securities as a Monetary Policy Instrument in the Islamic Banking System of Iran

The Journal of Muamalat and Islamic Finance Research ◽

10.33102/jmifr.v18i1.325 ◽

2021 ◽

pp. 31-40

Author(s):

Hossein Meisamy

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Financial Market ◽

Banking System ◽

Financial System ◽

Policy Instrument ◽

Islamic Banking ◽

Private Banks ◽

The Government ◽

First Time

This paper discusses the legitimacy of securitizing the central bank receivables from the government and banking system in the Iranian financial market and making use of this instrument to conduct monetary policy. Ijtihad or independent jurisprudential reasoning based on Imamiah Fiqh (prevailing in the Iranian Islamic banking system), is used as paper methodology. The results show that considering the jurisprudential ‘ownership unity’ between the central bank, the government, and governmental banks in the Iranian banking system, securitizing the central bank receivables from the government or the governmental banks is not legitimate and not Shariah-compliant. Nevertheless, it is possible to issue debt-sale securities based on the debts of private banks to the central bank. Therefore, issuing debt-sale securities based on central bank receivables from the private banks can be considered a suitable instrument for conducting Shariah-compliant monetary policy in the Islamic banking system of Iran. This paper discusses for the first time the idea of issuing debt-sale securities as a monetary policy instrument in the Iranian financial system. Besides, the analysis is based on the Imamiah School of Fiqh, which is also new.

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Central Bank Communication and Monetary Policy Predictability under Uncertain Economic Conditions

Journal of Central Banking Theory and Practice ◽

10.2478/jcbtp-2019-0011 ◽

2019 ◽

Vol 8 (2) ◽

pp. 5-32

Author(s):

Jonne O. Lehtimäki ◽

Marianne Palmu

Keyword(s):

Monetary Policy ◽

Financial Crisis ◽

Central Bank ◽

Policy Instrument ◽

Central Banks ◽

Short Term ◽

Policy Makers ◽

The Public ◽

Central Bank Communication ◽

Monetary Policy Transparency

Abstract Modern central banks increasingly value monetary policy transparency, and attempt to build credibility by communicating their decisions to the public. This paper studies whether the communication of central banks can be used to explain upcoming changes in their most important monetary policy instrument, the short-term refinancing rate, and whether the public can trust central bank communication during times of financial crisis. This is done by constructing an indicator to measure the predictability of monetary policy by calculating the median of the policy makers’ official comments. The performance of this indicator is studied with ordered probit methods. The results show that predictability was reached relatively well at central bank level during the financial crisis despite the rapid growth of economic uncertainty, and that communication can be a useful tool for central banks during uncertain times.

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Global Financial Crisis and Its Impact on Russia

Voprosy Ekonomiki ◽

10.32609/0042-8736-2009-1-9-27 ◽

2009 ◽

pp. 9-27 ◽

Cited By ~ 9

Author(s):

A. Kudrin

Keyword(s):

Monetary Policy ◽

Fiscal Policy ◽

Financial Crisis ◽

Central Bank ◽

Global Financial Crisis ◽

Developed Countries ◽

Real Economy ◽

Energy Prices ◽

Russian Government ◽

The Real

The article examines the causes of origin and manifestation of the current global financial crisis and the policies adopted in developed countries in 2007—2008 to deal with it. It considers the effects of the financial crisis on Russia’s economy and monetary policy of the Central Bank in the current conditions as well as the main guidelines for the fiscal policy under different energy prices. The measures for fighting the crisis that the Russian government and the Central Bank use to support the real economy are described.

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Endogeneity of Monetary Policy Reaction Fun~tion: An Experience from Pakistan's Economy

The Pakistan Development Review ◽

10.30541/v30i4iipp.931-941 ◽

1991 ◽

Vol 30 (4II) ◽

pp. 931-941

Author(s):

M. Aynul Hasan ◽

Qazi Masood Ahmed

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Money Supply ◽

Relative Effectiveness ◽

Reaction Function ◽

Standard Result ◽

Policy Variable ◽

Target Values ◽

Monetary Policy Reaction Function ◽

Policy Reaction Function

Monetary policy, in general, refers to those steps taken by the Central Bank to achieve such broader objectives of the economy as growth, employment, external balance and price stability through changes in the money supply, interest rates and credit policies. The money supply thus created by the Central Bank should be in response to the changes in key macroeconomic target variables such as GNP, balance of payments, inflation, internal debt and unemployment. Indeed, a properly estimated monetary policy reaction function can provide useful information regarding such matters as to whether the Central Bank, in fact, has been systematically accommodating to the changes in the target variables. The reaction function can also provide insight into the question as to what should be the relevant indicators of the monetary policy. In addition, as argued by Havrilesky (1967), it may also play a crucial role in the formulation of long-term monetary policy strategy. The other important consideration in the development of a monetary policy reaction function pertains to the endogeneity of the monetary policy. As pointed out by Goldfeld and Blinder (1972), if a policy variable responds to the lagged (or expected) target values, then considering such a policy variable as exogenous would not only introduce the problem of misspecification but will also produce serious biases in the parameters estimated from those models. In particular, if the monetary policy variable happens to be strongly influenced by target variables, then the standard result of the relative effectiveness of the monetary policy vis-a-vis fiscal policy can be questionable on the grounds of reverse causation problem.

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