Central Bank Planning

2018 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Practical Reasoning ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers until recently drew a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralized knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy further into the future, these unconventional policies nevertheless mark a structural break—the return of hydraulic macroeconomic state agency, refashioned for a financialized economy. This chapter analyses the theoretical and practical reasoning behind this shift in the governability paradigm and examines the epistemic and reputational costs of modern central bank planning and the non-market setting of long-term bond prices.

scholarly journals Central bank planning: Unconventional monetary policy and the price of bending the yield curve

2017 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Yield Curve ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance ◽  
Central Bankers

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers used to draw a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralised knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy into the future, these unconventional policies nevertheless mark a structural break – the return of hydraulic macroeconomic state agency, refashioned for a financialised economy.

scholarly journals Powrót do przedkryzysowej polityki pieniężnej a stabilność systemu finansowego

2017 ◽  
pp. 190-200
Author(s):  
Ilona Skibińska-Fabrowska
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Balance Sheet ◽  
Policy Instruments ◽  
Central Banks ◽  
Financial Assets ◽  
Negative Effects ◽  
The Stability

Faced with the financial crisis in 2008, the central banks used conventional monetary policy instruments. However, the problem of zero lower bond forced them to use unconventional monetary policy instruments - quantitative easing carried out as part of the so-called central bank balance sheet politics and relying on the buying by the central bank of di&erent kinds of financial assets - resulting in stabilization of the situation on financial markets in conditions of low long-term interest rates. Balance sheet totals of the central banks rose repeatedly. Their structure also changed. At present possible effects for the stability of the financial system of the return to the pre-crisis monetary policy are the topic of debate. The exit strategy is giving rise to a significant risks and the coordination of economic policy and the transparency of action taken by monetary authorities can only minimize possible negative effects

The Over-Burdened Central Bank and the Shift Away from Autonomy

2017 ◽  
Author(s):  
Pierre L. Siklos
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Central Banks ◽  
Central Banking ◽  
Forward Guidance ◽  
Self Assessments ◽  
Crisis Conditions ◽  
Central Bankers ◽  
Influence Behavior

Many central banks took on additional responsibilities. Inadequate self-assessments remain unfinished almost a decade after the crisis erupted. Government-central bank relationships need to be conditioned on whether times are normal versus crisis conditions. Transparency confronts ambiguity when central banks must communicate the outlook and the conditionality of their decisions. Forward guidance was taken too far and ended up being futile. Central bankers simply exhausted their ability to influence behavior through mere words or ambiguous statements. This is a self-inflicted wound for institutions that are seen as overburdened. These forces leave central banking more vulnerable than is commonly acknowledged. Squaring the conventional objectives of monetary policy with the unclear aims of financial stability is difficult. Adequate limitations on the authority of central banks have yet to be thoroughly debated. We are nowhere near resolving the inherent tensions between old and new sets of central bank objectives.

The Link between German Short- and Long-Term Interest Rates. Some Evidence against a Term Structure Oriented Monetary Policy / Der Zusammenhang zwischen kurz- und langfristigen Zinssätzen in Deutschland. Empirische Evidenz gegen eine zinsstrukturorientierte Geldpolitik

1998 ◽  
Vol 217 (2) ◽  
Author(s):  
Uwe Hassler ◽  
Dieter Nautz
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Term Structure ◽  
Monetary Union ◽  
Stable Relationship ◽  
Monetary Targeting ◽  
Main Indicator ◽  
Short And Long Term

SummaryCritics of the Bundesbank's monetary policy recently suggested the abandonment of monetary targeting in favour of the term structure of interest rates as the main indicator of central bank policy. However, a term structure oriented policy requires a reliable link between short- and long-term interest rates. Our analysis clearly suggests that there is no stable relationship between German short- and long-term interest rates, in particular not after the German monetary union. Consequently, the empirical results of this paper indicate that this policy has not much chance of success.

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.

Ultra-loose monetary policy will soon run its course

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Mutual Funds ◽  
Investor Sentiment ◽  
Central Banks ◽  
Target Range ◽  
Content Type ◽  
Equity Mutual Funds

Significance Expectations that the Fed will refrain from hiking its benchmark rates from its target range of 0.25-0.5% and that the Japanese central bank will provide further stimulus are suppressing volatility in financial markets and fuelling demand for risk assets. However, evidence that "overburdened" monetary policy is losing its efficacy triggered a sell-off in bonds and equities on September 9, increasing the scope for sharper price falls as investors worry that central banks have run out of ammunition. Impacts Services expanded in August at their slowest pace since 2010, making it less likely that the Fed will raise interest rates this month. EM bond and equity mutual funds have enjoyed a surge in inflows since the Brexit vote as yield-hungry investors pour money into risk assets Oil, a key determinant of investor sentiment, will stay below 50 dollars/barrel unless major producers agree measures to stabilise prices.

scholarly journals ROMANIAN INTERBANK INTEREST RATES AND CENTRAL BANK’S MONETARY POLICY

2019 ◽  
Vol 66 (4) ◽  
pp. 487-506
Author(s):  
Giovanni Verga ◽  
Nicoleta Vasilcovschi
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Central Banks ◽  
The European Union ◽  
European System ◽  
National Bank ◽  
Lending Rates ◽  
Main Determinants

Interbank rates are affected by the monetary policy of a country and represent a link to other financial and credit markets. In 2007, Romania became a member of the European Union and its central bank, the National Bank of Romania (NBR), joined the European System of Central Banks (ESCB) but not the Eurosystem. This paper analyses the role of the central bank and the use of its instruments concerning interbank rates. The research evaluates the influence of the Romanian Central Bank on interbank rates and shows that the policy rate and bank liquidity are among the main determinants of interbank rate movements. It is also presented that the NBR’s deposit and lending rates can limit the free movements of the interbank rate of interest. This research confirms that interbank interest rates influence bank rates strongly. The methodology used in this research includes cointegration, dynamic econometric measurement and analyses with Granger causality. Our research uses mainly ROBID and ROBOR of different maturities, showing that the influence of the Romanian Central Bank (NBR) on the interbank rate is strong, while the influence of the ECB and Fed is weak.

Open Market Operations

2019 ◽  
pp. 435-454
Author(s):  
Jan Toporowski
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Central Banks ◽  
Transmission Mechanism ◽  
Policy Framework ◽  
Monetary Transmission ◽  
Quantitative Easing ◽  
Open Market ◽  
Financial Systems

Open market operations are the buying and selling of securities by the central bank. Such operations differ from discount operations in that open market operations are undertaken at the initiative of the central bank rather than a commercial bank. Historically, such trading of securities has predated the setting of interest rates. The emergence of long-term finance and complex financial systems has extended the range of securities in which central banks may deal. Open market operations depend on the policy framework set by the central bank. But such operations are not necessary for the setting of interest rates. Such operations are often undertaken when the monetary transmission mechanism from interest rates appears to have failed, as in the case of recent quantitative easing operations. In general, open market operations have proved effective in times of banking or financial crisis.

Central Bank Communication

2019 ◽  
pp. 230-262
Author(s):  
Jakob de Haan ◽  
Jan-Egbert Sturm
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Inflation Expectations ◽  
Short Term ◽  
The Public ◽  
Central Bank Communication ◽  
Forward Guidance ◽  
The World ◽  
Future Direction

Many central banks in the world nowadays regard their external communication as an important tool to achieve their goals. This chapter provides an overview of the different ways in which central banks inform the public about the future direction of monetary policy and how successful they have been in recent years. Forward guidance is either part of a monetary policy strategy in which an explicit inflation target is targeted or is part of a strategy that attempts to circumvent the effective lower bound regarding the nominal interest rate. In both cases, forward guidance attempts to influence longer-term interest rates and inflation expectations through the expected future short-term interest rates.

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