scholarly journals Research on the Selection of China’s Intermediate Target of Monetary Policy

2016 ◽  
Author(s):  
Yuan SHE ◽  
Ting-ting ZHOU
Keyword(s):  
Monetary Policy ◽  
Intermediate Target ◽  
Selection Of

scholarly journals Some Evidence on Selecting an Intermediate Target for Monetary Policy

1983 ◽  
Vol 50 (2) ◽  
pp. 406 ◽  
Author(s):  
Lawrence S. Davidson ◽  
R. W. Hafer
Keyword(s):  
Monetary Policy ◽  
Intermediate Target

scholarly journals The Deutsche Bundesbank's Concept of Monetary Policy, With Particular Reference to its Choice of Intermediate Variables in the Period 1972-1979

2021 ◽  
Author(s):  
◽  
Petrus Simons
Keyword(s):  
Monetary Policy ◽  
Public Sector ◽  
Foreign Capital ◽  
Bank Lending ◽  
Capital Formation ◽  
Wage Bargaining ◽  
Price Stability ◽  
Money Stock ◽  
Intermediate Target ◽  
Loan Rate

<p>The maintenance of price stability is the Bundesbank's ultimate objective. The memory of two hyperinflations within a 30-year period has made the fight against inflation of paramount social and political importance. In the Bank's view inflation engenders uncertainties which may jeopardise capital investment on which the competitiveness of German industry as well as full employment and economic growth depends. The Bundesbank pursues this goal by setting the marginal cost of central bank money required by the banks to finance their expansion. Thus, both the liquidity of the banking system and the cost of borrowing are controlled. This does not necessarily mean that the banks' loan rate of interest is the Bundesbank's Intermediate target. In fact, the Bank does not have one single intermediate target. Since the Bank's views of the monetary sector are manifested in the form of an interlocking system of financial variables, the selection of an appropriate intermediate target depends on the actual economic situation. In this context, the money stock supply (M3) is seen by the Bundesbank as functionally related to bank lending and the accumulation of long-term funds at the banks (monetary capital formation). An increase in interest rates would reduce bank lending, stimulate monetary capital formation and hence reduce the money stock supply (M3). In addition, it would check the utilisation of the money stock supply. This is seen as important because once money has entered the system it may generate unacceptable expenditure flows. To control the growth of the money stock supply, the Bundesbank relies on monetary capital formation, because small stocks of public debt rule out large-scale open market operations. In the Bank's view monetary policy should aim at keeping the banks' loan rate of interest as closely as possible to the natural rate. Lags in this Wicksellian transmission process may arise if the banks have ample margins between their loan and deposit rates when a restrictive monetary policy is implemented. As deposit rates adjust sooner than loan rates to a change in market rates, this also blunts the immediate impact of a policy change. The Bundesbank favours flexible rates of exchange in order to safeguard the financial system against inflows of foreign capital. It would welcome an appreciation of the D-Mark as a contribution to price stability, even though it could result in a loss of employment and exports as it stimulates German business to invest abroad. Furthermore, the Bank aims at constraining the monetary disturbances arising from public sector deficits and collective wage bargaining by means of its annual monetary growth target. This should serve as a signal to non-banks, which they are supposed to internalise in their decision-making. During the review period, the effectiveness of these safeguards was small as witnessed by inflows of foreign capital, large public sector deficits and excessive wage settlements. Moreover, the Bundesbank has been confronted with the development of parallel markets, in particular the Eurocurrency markets, in which borrowers can avoid the effects of its constraints.</p>

Money, Central Banks, and Low Financial Development Countries

2021 ◽  
pp. 1-44
Author(s):  
Juan Antonio Morales ◽  
Paul Reding
Keyword(s):  
Monetary Policy ◽  
Financial Development ◽  
Central Banks ◽  
Historical Background ◽  
Special Role ◽  
Design And Implementation ◽  
Financial Depth ◽  
Per Capita ◽  
Selection Of

This chapter gives a general overview of the nuts and bolts of monetary policy and presents the low financial development countries that are the focus of this book. It discusses, with some historical background, the special role of money in the financial system, the functions of central banks, and the mandates society has entrusted them with. It also shows how monetary policy is structured within a specific framework of targets and instruments that guides the central bank’s interventions. Finally, it presents the main features that characterize the selection of developing countries that the book aims to address and that raise specific challenges for the design and implementation of their monetary policy: low per capita income, low financial depth, and weak integration with international financial markets.

The Real but Limited Influence of Expert Ideas

2009 ◽  
Vol 61 (4) ◽  
pp. 703-730 ◽  
Author(s):  
Johannes Lindvall
Keyword(s):  
Monetary Policy ◽  
Economic Policy ◽  
Exchange Rate ◽  
Strong Influence ◽  
Policy Instruments ◽  
Policy Changes ◽  
Level Of Activity ◽  
Policy Objectives ◽  
The Rich ◽  
Selection Of

A number of influential studies in political science argue that important economic policy changes in the rich democracies since the mid-1970s were caused by the introduction of new economic ideas. This article claims that while experts exert strong influence over the selection of policy instruments, their influence over the formulation of policy objectives is much weaker. In the 1970s, 1980s, and 1990s, the predominance of Keynesianism in Austria and Denmark did not lead Austrian and Danish governments to maintain low unemployment longer than Sweden, where Keynesianism was less strong. But it did lead them to regard fiscal policy as an instrument that can be used to control the level of activity in the economy, while their Swedish counterparts relied instead on exchange rate and monetary policy.

WHEN DOES MONETARY MEASUREMENT MATTER (MOST)?

2018 ◽  
pp. 1-17
Author(s):  
Makram El-Shagi
Keyword(s):  
Monetary Policy ◽  
Index Number ◽  
Economic Uncertainty ◽  
Monetary Policy Shocks ◽  
Interaction Terms ◽  
Index Number Theory ◽  
Policy Shocks ◽  
Local Projections ◽  
Relevant Interaction ◽  
Selection Of

It has repeatedly been shown that properly constructed monetary aggregates based on index number theory (such as Divisia money) vastly outperform traditional measures of money (i.e. simple sum money) in empirical models. However, opponents of Divisia frequently claim that Divisia is “too complex” for little gain. And indeed, at first glance it looks as if simple sum and Divisia sum exhibit similar dynamics. In this paper, we want to build deeper understanding of how and when Divisia and simple sum differ empirically using monthly US data from 1990M1 to 2007M12. In particular, we look at how they respond differently to monetary policy shocks, which seems to be the most essential aspect of those differences from the perspective of the policy maker. We use a very rich, fairly agnostic setup that allows us to identify many potential nonlinearities, building on a smoothed local projections approach with automatic selection of the relevant interaction terms. We find, that—while the direction of change is often similar—the precise dynamics differ sharply. In particular in times of economic uncertainty, when the proper assessment of monetary policy is most relevant, those existing differences are drastically augmented.

scholarly journals Money Supply as the Target of the Central Bank

2014 ◽  
Vol 14 (1) ◽  
pp. 116-136
Author(s):  
Andrzej Jędruchniewicz
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Money Supply ◽  
Point Of View ◽  
Main Trend ◽  
Demand For Money ◽  
Intermediate Target ◽  
The Third ◽  
Production And Consumption ◽  
Shape Changes

Abstract The main purpose of the article is a critical analysis of the monetary policy strategy that is based on the adoption of money supply as an intermediate target. The analysis is conducted from the perspective of the theory of the Austrian school. The first part of the article presents an influence of the supply of money on changes of categories in economy according to mainstream theories of economics. The second part discusses the essence of the strategy of monetary policy using money supply as an intermediate target from the point of view of the main trend in economics. It is demonstrated that in order to use it, two elementary conditions must be met: the function of demand for money must be at least relatively stable and the central bank must practically shape changes in the money supply at the planned level. The third part is of key importance for the purpose of this article. It involves the criticism of Friedman’s principle, i.e. a constant increase in money supply as a monetary strategy. According to the Austrian theory, an increase in the quantity of money which is not financed by voluntary savings separates the time structure of production and consumption. Thus, after the period of prosperity there a collapse in production must take place. It is also pointed out that the crisis can be postponed only when the quantity of money increases at an ever faster rate.

scholarly journals The Deutsche Bundesbank's Concept of Monetary Policy, With Particular Reference to its Choice of Intermediate Variables in the Period 1972-1979

2021 ◽  
Author(s):  
◽  
Petrus Simons
Keyword(s):  
Monetary Policy ◽  
Public Sector ◽  
Foreign Capital ◽  
Bank Lending ◽  
Capital Formation ◽  
Wage Bargaining ◽  
Price Stability ◽  
Money Stock ◽  
Intermediate Target ◽  
Loan Rate

<p>The maintenance of price stability is the Bundesbank's ultimate objective. The memory of two hyperinflations within a 30-year period has made the fight against inflation of paramount social and political importance. In the Bank's view inflation engenders uncertainties which may jeopardise capital investment on which the competitiveness of German industry as well as full employment and economic growth depends. The Bundesbank pursues this goal by setting the marginal cost of central bank money required by the banks to finance their expansion. Thus, both the liquidity of the banking system and the cost of borrowing are controlled. This does not necessarily mean that the banks' loan rate of interest is the Bundesbank's Intermediate target. In fact, the Bank does not have one single intermediate target. Since the Bank's views of the monetary sector are manifested in the form of an interlocking system of financial variables, the selection of an appropriate intermediate target depends on the actual economic situation. In this context, the money stock supply (M3) is seen by the Bundesbank as functionally related to bank lending and the accumulation of long-term funds at the banks (monetary capital formation). An increase in interest rates would reduce bank lending, stimulate monetary capital formation and hence reduce the money stock supply (M3). In addition, it would check the utilisation of the money stock supply. This is seen as important because once money has entered the system it may generate unacceptable expenditure flows. To control the growth of the money stock supply, the Bundesbank relies on monetary capital formation, because small stocks of public debt rule out large-scale open market operations. In the Bank's view monetary policy should aim at keeping the banks' loan rate of interest as closely as possible to the natural rate. Lags in this Wicksellian transmission process may arise if the banks have ample margins between their loan and deposit rates when a restrictive monetary policy is implemented. As deposit rates adjust sooner than loan rates to a change in market rates, this also blunts the immediate impact of a policy change. The Bundesbank favours flexible rates of exchange in order to safeguard the financial system against inflows of foreign capital. It would welcome an appreciation of the D-Mark as a contribution to price stability, even though it could result in a loss of employment and exports as it stimulates German business to invest abroad. Furthermore, the Bank aims at constraining the monetary disturbances arising from public sector deficits and collective wage bargaining by means of its annual monetary growth target. This should serve as a signal to non-banks, which they are supposed to internalise in their decision-making. During the review period, the effectiveness of these safeguards was small as witnessed by inflows of foreign capital, large public sector deficits and excessive wage settlements. Moreover, the Bundesbank has been confronted with the development of parallel markets, in particular the Eurocurrency markets, in which borrowers can avoid the effects of its constraints.</p>

Monetary Politics: Origins of the Federal Reserve

2013 ◽  
Vol 27 (1) ◽  
pp. 1-13 ◽  
Author(s):  
Sarah Binder ◽  
Mark Spindel
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Great Depression ◽  
Federal Reserve ◽  
Hybrid Structure ◽  
The Great Depression ◽  
Reserve Bank ◽  
Political Interests ◽  
Reserve System ◽  
Selection Of

Nearly unique amongst the world's monetary bodies, the Federal Reserve defies description as a central bank. A century after its creation, the Fed retains a hybrid structure of a president-appointed, Senate-confirmed Washington board and twelve largely privately directed regional reserve banks—each of which remains moored in the cities originally selected in 1914. In this article we investigate the origins of the Federal Reserve System, focusing on the selection of the twelve reserve bank cities. In contrast to accounts that suggest politics played no role in the selection of the cities, we suggest that a range of political interests shaped Democrats' choices in designing the reserve system. The result was a decentralized institution that initially proved unable to coordinate monetary policy—a key contributor to the onset of the Great Depression less than two decades later.

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