scholarly journals International and Domestic Constraints on Political Business Cycles in OECD Economies: A Comment

2002 ◽  
Vol 56 (1) ◽  
pp. 209-221 ◽  
Author(s):  
Erik Leertouwer ◽  
Philipp Maier
Keyword(s):  
Monetary Policy ◽  
Business Cycles ◽  
Central Banks ◽  
Short Term ◽  
Rate System ◽  
Political Business Cycles ◽  
Panel Model ◽  
Domestic Constraints ◽  
Exchange Rate System ◽  
Effect Of Monetary Policy

We attempt to assess the effect of monetary policy in a panel model for 16 member countries of the Organization for Economic Cooperation and Development (OECD). To answer the question of whether central banks actively create political business cycles, we focus on the short-term interest rate as a proxy for the use of monetary instruments. Our results indicate that central banks do not create political business cycles. This conclusion holds whether or not central banks are independent and whether or not they are constrained by the exchange-rate system in force.

scholarly journals Effectiveness of Monetary Policy Instruments on Economic Growth in Jordan Using Vector Error Correction Model

2017 ◽  
Vol 9 (11) ◽  
pp. 194
Author(s):  
Rami Obeid ◽  
Bassam Awad
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Policy Instruments ◽  
Short Term ◽  
Correction Model ◽  
Vector Error Correction ◽  
Real Gdp ◽  
Vector Error ◽  
Effect Of Monetary Policy

The global financial crisis emphasized the important role of the prudent monetary policy in supporting economic growth through maintaining price stability. The monetary policy operational framework that was designed in 2008 was updated to include more instruments for managing monetary policy learning from the crisis lessons. Several studies analyzed various dimensions related to economic growth in Jordan such as Abdul-Khaliq, Soufan, and Abu Shihab (2013) and Assaf (2014), there were no studies that investigated the effect of monetary policy on economic growth in Jordan, at least recently, however. The study aims at measuring the effect of monetary policy instruments on the performance of Jordanian economy. Using quarterly data covering the period (2005-2015), an econometric model was examined using Vector Error Correction Model to assess the impact of monetary policy instruments on economic growth. The foremost advantage of VECM is that it has a nice interpretation of long-term and short-term equations. The results showed the existence of positive long-term and short-term effects of monetary policy instruments on the growth of real GDP. The model included three monetary policy instruments besides money supply. They are required reserve ratio, rediscount rate and overnight interbank loan rates as independent variables, and the real GDP growth as a dependent variable. The stationarity of the model time series was addressed. In addition, the stability of the model was tested using stability diagnostics tools. The results showed also an existence of inverse relationship between rediscount rate and economic growth in Jordan over both long and short terms.

scholarly journals Sustainable Approach to the Normalization Process of the UK’s Monetary Policy

2020 ◽  
Vol 12 (21) ◽  
pp. 9229
Author(s):  
Aleksandra Nocoń
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Global Financial Crisis ◽  
Synthesis Method ◽  
Balance Sheet ◽  
Central Banks ◽  
Short Term ◽  
Effect Analysis ◽  
Short Term Prediction ◽  
Normalization Process

It has been more than a decade since central banks, in the face of the global financial crisis, implemented a set of unconventional initiatives that included a rapid and significant decrease in their main interest rates and an unprecedented balance sheet policy. Thus far, they still have not returned their monetary policy to the pre-crisis framework and have not implemented a normalization process. Currently, a trend of using econometric models in monetary policy for forecasting purposes has been observed. Among these models, Bayesian vector autoregression models (BVAR models) are increasingly being used by central banks. The main aim of this study was to conduct an empirical verification of the BVAR model’s usage for short-term prediction which could then be used for a sustainable (ordered) normalization process for the UK’s monetary policy. This study verifies a research hypothesis which states that the BVAR model might be a useful tool in the Bank of England’s decision-making process regarding the normalization of its monetary policy. Additionally, the cause and effect analysis, observation method, document analysis method, and synthesis method were also considered. The conducted research indicates that a large BVAR model has a significant predictive value for short-term forecasting.

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.

The czech experience with inflation targeting in transition

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Kateřina Šmídková ◽  
Miroslav Hrnčíř
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Inflation Targeting ◽  
Central Banks ◽  
Communication Strategy ◽  
The Other ◽  
Short Term ◽  
Countries In Transition ◽  
The One

This paper argues that inflation targeting is a strategy that can be under certain conditions adopted by central banks in countries in transition even though their typical goal is to disinflate instead of stabilising low inflation. On the one hand, according to the Czech experience, inflation targeting offers several benefits, such as increasing control over expectations and short-term flexibility of monetary strategy, that are attractive for economy in transition. On the other hand, constraints imposed by period of transition as well as by openness of economy are present no matter which monetary strategy is chosen by the central bank. Implied costs should not be attributed to a particular monetary strategy. Inflation targeting has made various factors constraining monetary policy more visible and, as a result, requirements on the quality of decisions as well as on communication strategy have increased.

scholarly journals Short-term deviations from monetary policy commitment in a monetary union: the degrees of freedom of an independent central bank

2016 ◽  
Author(s):  
Muriel Dal-Pont ◽  
Dominique Torre ◽  
Elise Tosi
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Monetary Union ◽  
Degrees Of Freedom ◽  
Real Income ◽  
Central Banks ◽  
Political Authority ◽  
Short Term ◽  
Distributed Information ◽  
Transmission Channels

The paper presents a model analyzing the degrees of freedom of an independent but committed Central Bank within a monetary union. In the model, interactions between Agents, Supranational Political Authorities and the Central Bank of the Union determine the current nominal and real outcomes. Imperfectly distributed information on shocks affecting supply, transmission channels and short-term expectations create opportunities for a Central Bank to deviate from its announced objective. This opportunity to deviate especially applies to Central Banks free from any kind of inflationary bias and committed to a strictly nominal target. Under certain conditions we show that nominal deviations from stated targets are not observable either by Agents or the Supranational Political Authority that periodically selects the membership of the Council of Monetary Policy of the Bank. Those deviations increase the variance of nominal values but dampen fluctuations of real income. Our results confirm, within a monetary union, the position defended by Cukierman and Metzler concerning the efficiency of a Central Bank’s ambiguous behaviour.

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.

FINANCING RESOURCE DEVELOPMENT AFTER CAMPBELL

1982 ◽  
Vol 22 (1) ◽  
pp. 153
Author(s):  
G. A. Gloster
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Financial Markets ◽  
Interest Rates ◽  
Resource Development ◽  
Bank Lending ◽  
Access To Finance ◽  
Rate System ◽  
Financial Activity ◽  
Exchange Rate System

The paper deals briefly with the basic nature of financial activity and markets and of the intermediaries, including banks, within these markets. It is argued that efforts by the authorities to affect monetary policy through controls on bank lending (quantitative and interest rates) are inefficient and only lead to circumvention. To the degree that prices (interest rates) are kept down in one area, they will be higher in another, and supply of credit reduced from one source will encourage a greater supply from another. The Campbell Committee's recommendations, if implemented, are likely to result in freer financial markets and to improve the resource development sector's access to finance. Clear examples would be the removal of foreign exchange restrictions and the setting up of a market-oriented exchange rate system. However, in one sense this access may be narrowed as the extension of bank-type prudential controls to bank subsidiaries and to all 'deposit-taking institutions' may impede the free functioning of financial markets as well as further entrenching the 'safeguarded deposit' concept over the community's savings.

Sign in / Sign up

Export Citation Format

Share Document