Monetary Policy Instruments

2021 ◽  
pp. 89-144
Author(s):  
Juan Antonio Morales ◽  
Paul Reding
Keyword(s):  
Monetary Policy ◽  
Foreign Exchange ◽  
Policy Instruments ◽  
Central Banks ◽  
Open Market ◽  
Monetary Policies ◽  
Reserve Requirements ◽  
Intermediate Targets ◽  
The Way

This chapter presents and discusses the instruments of monetary policy that are used by LFDCs’ central banks. The trend towards market-based monetary policies has been followed by LFDCs’ central banks, which have increasingly resorted to indirect instruments, though direct instruments that are, like exchange controls, of a more administrative nature are still common. The chapter surveys the particular features of reserve requirements, refinancing facilities, open market operations and foreign exchange interventions of LFDCs’ central banks. Each instrument is discussed in detail: its specific purpose, the context, mechanisms and modalities of its use, its advantages but also its possible drawbacks. The way central banks in LFDCs combine these instruments to achieve their operating and intermediate targets is also examined. The discussion is illustrated by examples taken from selected countries.

Monetary Policy Operations of Central Banks in the E7 Economies

2020 ◽  
pp. 65-91
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Crucial Role ◽  
Policy Instruments ◽  
Active Role ◽  
Central Banks ◽  
Central Banking ◽  
Fiscal Policies ◽  
Monetary Policies ◽  
Sustainable Economic Growth

Both monetary and fiscal policies have a crucial role in the financial markets of the countries. In this framework, policies can be used for mainly two different purposes, which are contractionary and expansionary policies. Hence, it can be said that monetary policies play a key role especially for the emerging economies. The main reason is that these are the economies that aim to be a developed economy. In order to reach this objective, they aim to make investment to obtain sustainable economic growth. Similar to this aspect, this chapter aims to identify different monetary policy operations of the central banks. Thus, various monetary policy instruments are explained. After this issue, necessary information is given related to the central banking operations of E7 economies. As a result, it is defined that central banks of these countries play an active role especially during the recession period.

scholarly journals The Limitations of Foreign-Exchange Intervention: Lessons from Switzerland

2013 ◽  
pp. 1-6 ◽  
Author(s):  
Owen F. Humpage
Keyword(s):  
Monetary Policy ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Developed Countries ◽  
Central Banks ◽  
Recent Experience ◽  
Monetary Policies ◽  
Foreign Exchange Intervention ◽  
Monetary Authorities ◽  
National Bank

Since the mid-1990s, monetary authorities in most large developed countries have backed away from foreign-exchange intervention—buying and selling foreign currencies to influence exchange rates. Switzerland's recent experience goes a long way to illustrate why: Foreign-exchange intervention did not afford the Swiss National Bank with a means of systematically affecting the franc independent of Swiss monetary policy, and it left the Bank exposed to foreign-exchange losses. To affect exchange rates, central banks must change their monetary policies.

scholarly journals Monetary Policy Response in the Republic of North Macedonia and the Republic of Albania for Coping with the Pandemic COVID-19 in 2020

2021 ◽  
Vol 7 (1) ◽  
pp. 77-88
Author(s):  
Alba Pollozhani ◽  
Shenaj Hadzimustafa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Central Banks ◽  
Open Market ◽  
Macroeconomic Policies ◽  
Monetary Policies ◽  
Creative Commons ◽  
Interest Rate Volatility ◽  
The Republic ◽  
Reserve Ratio

This study aims to analyse how the monetary policies of the Republic of North Macedonia and the Republic of Albania, as one of the two critical macroeconomic policies, have reacted in response to COVID-19 for the year 2020. Last year, the year 2020, the pandemic caused these two countries to react through monetary policy. This research examines how central banks of both countries have changed traditional monetary policy tools for tackling the pandemic, starting with open market operations, required reserve ratio, the overnight loans interest rate, and the available deposits interest rate. The research continues with analyzing whether they were used and what non-traditional tools were applied in that period. The study analysis concludes which monetary policies have been pursued in the Republic of North Macedonia and the Republic of Albania, whether there have been non-traditional tools and how the scope for interbank interest rate volatility has changed. Our study revealed that both countries had pursued an expansive monetary policy, there were also non-traditional tools, and the scope for interbank interest rate volatility has shifted towards narrowing. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

scholarly journals Monetary Policy Its Instruments and Convergence of Its Objectives: Case of Angola 2005/2017

2019 ◽  
Vol 5 (2) ◽  
pp. 161
Author(s):  
Antonio, Pitshu Massaka
Keyword(s):  
Monetary Policy ◽  
Policy Instruments ◽  
Multiple Linear Regression Model ◽  
Economic Thought ◽  
Policy Framework ◽  
Open Market ◽  
New Paradigm ◽  
Keynesian Model ◽  
Market Operation ◽  
Open Market Operation

<p><em>This paper proposes a new paradigm for the analysis of monetary policy, and presents the monetary policy framework in Angola which includes the policy instruments, and implementation mechanism the way between instrument and objective.<strong> </strong>To study the Monetary Policy instruments in Angola based on a multiple linear regression model. Before the model was conceived an analogy was made about the politics and instruments of monetary policy from the classical Keynesian model in the matter, but also less important also to analyze the concrete objective of monetary policy if the authors agree connected with those currents of economic thought. For the estimation of the equation for the monetary aggregate M2 that represents the money supply by the Central Bank in Angola The author applied the current implementation and the existing theories to display the Angola monetary tools such as basic interest rate for monetary policy orientation (tbna), open market operation, Lending Facility, coefficient of required reserve, net international reserves, and the Gross Domestic Product, the reference oil price to brent. Most of the variables present the expected results.</em></p>

scholarly journals Comparison of effects of expansionary monetary policy in the Czech Republic and Slovakia

2020 ◽  
Vol 74 ◽  
pp. 04006
Author(s):  
Boris Fisera ◽  
Jana Kotlebova
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Banking Sector ◽  
Open Economies ◽  
Balance Sheet ◽  
Bank Lending ◽  
Central Banks ◽  
Monetary Policies ◽  
The Czech Republic ◽  
Economic Developments

The ongoing process of globalization has affected the way the monetary policy is conducted – and this is especially the case of small open economies, where the economic developments are heavily affected by the developments abroad. Therefore, the aim of this paper is to investigate the effects of unconventional monetary policy in two very open economies – Slovakia and the Czech Republic in the post-crisis era – the two rather similar very open economies. We assess the effects of their monetary policies by estimating their impact on the banking sector in both countries. We employ two cointegrating estimators – DOLS and FMOLS, so that we can assess the dynamics of the relationship between the developments of main balance sheet items of the respective central banks and the aggregate bank lending to various sectors of the economy. We do find evidence that unconventional policies of both central banks did lift bank lending – with the effect being stronger in Slovakia and for the QE policies. In both countries, the effect was more pronounced for the bank lending to household sector – specifically on housing related loans. Finally, we do not find evidence that the increasing openness of these two already very open economies affected the transmission of monetary policies into the banking sector.

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 ANALYSIS OF CREDIT INSTRUMENTS FOR INCREASING FINANCIAL AND INVESTMENT POTENTIAL OF THE REGION

2020 ◽  
Vol 70 (4/2020) ◽  
pp. 161-173
Author(s):  
R. V. Badylevich ◽  
◽  
E. A. Verbinenko ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Banking Sector ◽  
Policy Instruments ◽  
The State ◽  
Russian Arctic ◽  
Open Market ◽  
Autonomous District ◽  
Murmansk Region ◽  
Nenets Autonomous

The article is devoted to analyzing credit instruments for increasing the financial and investment potential of the region. The place of credit instruments in the state monetary policy system is considered, and the influence of the monetary policy on regional economic processes is analyzed. Based on the analysis of the relevant research works, the thesis on different reactions of regions to significant decisions of monetary authorities while implementing the monetary policy is confirmed. Possibilities of differentiating application of the monetary policy instruments by territories in accordance with the development specifics of individual regions or their clusters are studied. It is concluded that some of the instruments (interest rates on operations of the Bank of Russia, mandatory reserve requirements, open market operations, refinancing of credit institutions) have a potential to adapt their use in the regional context. Separately, the article highlights and analyzes direct regional tools for enhancing credit activities, such as direct lending to priority areas and sectors of the economy by regional authorities, subsidizing credit rates for certain categories of borrowers, and creating regional credit organizations with governmenta participation. Based on the assessment of the principles of using the instruments to increase the financial and investment potential of the region, the article provides recommendations for choosing credit instruments for the regions of the Russian Arctic zone (Arkhangelsk region, Nenets Autonomous district, Yamalo-Nenets Autonomous district, Republic of Karelia, Komi Republic, Murmansk region, Krasnoyarsk territory, Republic of Sakha (Yakutia)). For this purpose, the features of building and functioning of the financial systems of the Russian Arctic regions, and the state and performance indicators of their banking sector were analyzed.

scholarly journals MONETARY POLICY RULES IN MALAYSIA, SINGAPORE AND THAILAND

2020 ◽  
Vol 23 (4) ◽  
pp. 565-596
Author(s):  
Chai-Thing Tan ◽  
Azali Mohamed
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Government Spending ◽  
Taylor Rule ◽  
Central Banks ◽  
Monetary Policies ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
The Exchange Rate ◽  
Monetary Policy Reaction Function

This paper investigates whether monetary policies in Malaysia, Thailand and Singapore are best represented by either the Taylor rule or the augmented Taylor rule. It finds that the augmented Taylor rule, which incorporates the exchange rate and government spending, best represents monetary policies in these countries. The results show that past inflation and the output gap play a role in the monetary policy reaction function in Malaysia and Thailand. The results further show a strong preference towards interest rate smoothing, government spending, and the exchange rate by the central banks.

scholarly journals APPLICATION OF UNCONVENTIONAL MONETARY POLICY INSTRUMENTS IN MITIGATION OF THE ECONOMIC CONSEQUENCES OF THE COVID 19 VIRUS PANDEMIC

2020 ◽  
pp. 231
Author(s):  
Marina Đorđević ◽  
Jadranka Đurović Todorović ◽  
Milica Ristić Cakić
Keyword(s):  
Monetary Policy ◽  
Aggregate Demand ◽  
Policy Instruments ◽  
Central Banks ◽  
Economic Consequences ◽  
Quantitative Easing ◽  
Unconventional Monetary Policy ◽  
Monetary Authorities ◽  
The Republic ◽  
Theoretical Overview

Unconventional monetary policy instruments are used in conditions when monetary policy has exhausted all the usual measures and instruments that are otherwise applied by the central bank in the regular process of conducting monetary policy. The most commonly used instruments are, of course, quantitative easing or quantitative alleviation.The aim of this paper is to point out the application of unconventional monetary policy instruments during the economic crisis caused by the COVID 19 virus pandemic in the most important banks in the world. After a theoretical overview of the concept of quantitative easing, the paper presents the empirical experiences of the Bank of Japan, the Fed, the ECB, and other central banks. Based on the analysis of applied measures and data on the use of quantitative facilities in selected central banks, it can be concluded that they resorted to the use of this instrument in times of crisis to a greater or lesser intensity. Also, the increased liquidity caused by their implementation had a significant impact on aggregate demand, inflation and GDP. This analysis can be useful to the monetary authorities in Serbia if they are to review the application of QE in the leading monetary institutions and help them to draw the conclusions that would lead to the most painless application of this instrument in the Republic of Serbia.

Optimal macroprudential regulation tools

2020 ◽  
Vol 26 (4) ◽  
pp. 774-795
Author(s):  
I.R. Ipatyev
Keyword(s):  
Monetary Policy ◽  
Financial Institutions ◽  
Policy Instruments ◽  
Financial Policy ◽  
Policy Options ◽  
Macroprudential Policy ◽  
Monetary Policies ◽  
Credit Cycles ◽  
Systemic Risks ◽  
Optimal Set

Subject. This article examines the hypothesis that microprudential and monetary policies are not able to provide measures to prevent excessive lending and guarantee the ability of financial institutions to cope with the growing credit bubble. Objectives. The article examines approaches to identifying viable macroprudential policy options and an optimal set of regulation instruments. Methods. For the study, I used a content analysis and generalization. Results. The article presents some results of the assessment of certain macroprudential requirement instruments. Conclusions. The study shows that some macroprudential policy tools can reduce systemic risks associated with credit cycles. Monetary policy alone is not able to effectively withstand the credit bubble risk. All financial policy instruments must be taken and considered together, as they work closely together.

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