scholarly journals Let's close the gap: Revising teaching materials to reflect how the Federal Reserve implements monetary policy

2020 ◽  
Vol 2020 (089) ◽  
pp. 1-49
Author(s):  
Jane Ihrig ◽  
◽  
Scott Wolla ◽  
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Banking System ◽  
Implementation Framework ◽  
Teaching Resources ◽  
The Past ◽  
Standards And Guidelines ◽  
Implementation Of Monetary Policy ◽  
Dual Mandate ◽  
The Way

The topic of the Federal Reserve’s (the Fed’s) implementation of monetary policy has a significant presence in economics textbooks as well as standards and guidelines for economics instruction. This presence likely reflects the fact that it is the implementation framework that helps ensure that the Fed’s desired level of its policy interest rate is transmitted to financial markets, which helps it steer the economy toward the Congressional dual mandate of maximum employment and price stability. Over the past decade or so, the Fed has purposefully shifted the way it implements monetary policy to an environment with ample reserves in the banking system, and it has introduced new policy tools along the way. This paper shows that, unfortunately, many teaching resources are not in sync with the Fed’s current framework. We review six, 2020 or 2021 edition, principles of economics textbooks, and we find they vary greatly in their coverage of the concepts associated with the way the Fed implements policy today and in the longer run. We provide recommendations on how the authors can improve the next editions of their textbooks. We also review standards and guidelines used by secondaryschool educators. All of these are out of date, and we provide proposals for how these materials can be updated.

scholarly journals Polityka pieniężna Narodowego Banku Polskiego od roku 1989

2015 ◽  
pp. 173-192
Author(s):  
Paweł Franka ◽  
Anna Wisz
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Exchange Rates ◽  
Inflation Targeting ◽  
Banking System ◽  
Policy Instruments ◽  
Open Market ◽  
The Past ◽  
National Bank

The article discusses the activities of National Bank of Poland during the past twenty-five year and more specifically in the years 1989–2013 with particular emphasis on monetary policy. During this time, the Polish central bank has undergone fundamental change, starting from the position of the so-called monobank, i.e. bank without autonomy in activities, characteristic of planned economy. The article describes the process of transformation of the National Bank of Poland to the role of a central bank operating in a market economy. The paper emphasizes all the important events in the transformation, including building of a two-tier banking system, the gradual replacement of the administrative measures by monetary policy instruments, currency denomination, constitutional guarantees of the role and independence of the National Bank of Poland, creation of the Monetary Policy Council – a departure from the single monetary policy-making in favor of collegiality, changing the monetary policy strategy to direct inflation targeting, bank exchange rates policy, open market operations.

scholarly journals Mekanisme Transmisi Kebijakan Moneter dalam Mempengaruhi Inflasi dan Pertumbuhan Ekonomi di Indonesia

2018 ◽  
Vol 5 (4) ◽  
pp. 460-473
Author(s):  
Rifky Yudi Setiawan ◽  
Karsinah Karsinah
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Banking System ◽  
Transmission Mechanism ◽  
Islamic Banks ◽  
Monetary Policies ◽  
Banking And Finance ◽  
Financing Channel ◽  
Dual Mandate ◽  
Conventional And Islamic Banks

Sejak dikeluarkannya UU Bank Indonesia yang baru tahun 1999, Bank Indonesia telah diberi amanah sebagai otoritas moneter ganda yang dapat menjalankan kebijakan moneter konvensional maupun syariah. Sejak saat itu perbankan dan keuangan syariah berkembang pesat.Penelitian ini bertujuan untuk melihat alur transmisi kebijakan moneter dari sisi konvensional dan syariah dalam mempengaruhi inflasi dan pertumbuhan ekonomi, yang kemudian membandingkan keduanya.  Hasil penelitian menunjukkan jalur konvensional memiliki alur sesuai dengan teori transmisi kebijakan moneter yang ada hingga mempengaruhi inflasi dan pertumbuhan ekonomi, sedangkan jalur syariah belum mempunyai alur yang sesuai dengan teori kebijakan moneter yang ada. Berdasarkan hasil VECM variabel syariah dapat menurunkan laju inflasi dan meningkatkan pertumbuhan ekonomi, sedangkan variabel konvensional dapat menurunkan laju inflasi akan tetapi menahan laju pertumbuhan ekonomi. Kemudian berdasarkan hasil FEVD jalur konvensional lebih berpengaruh dalam mengendalikan pertumbuhan ekonomi dan inflasi dengan masing-masing kontribusi sebesar 50,5% dan 19,97%, sedangkan jalur syariah masing-masing sebesar 29,07%. dan 19,47%. Since New Banking Act in 1998, Indonesia has implemented a dual banking system, where conventional and Islamic banks can operate side by side throughout Indonesia. With the implementation of Bank of Indonesia’s Act in 1999, Bank of Indonesia has a dual mandate to conduct both conventional and Islamic monetary policies. Since then, the Islamic banking and finance has been growing rapidly.  The aim of this study is to see how transmission channel of monetary policy from side of conventional and Sharia channel to Influence Inflation and Economic Growth compare them both. The results showed the conventional channel is worked according to the theory of transmission mechanism of monetary policy that affect the final target inflation and economic growth, whereas Sharia channel does not worked according to the monetary policy. Based on the results of VECM on Sharia channel variable can reduce the inflation and increase the economic growth at the same time, while the variable of conventional channel can reduce the inflation but also reduce the economic growth at the same time. Then based on the results of FEVD conventional channel is more effective in controlling the economic growth and the inflation with contribution of 50.5%  and 19.97%. while the Islamic bank financing channel with contribution of 29.07% and 19.47%.

Controlling Household Credit

1988 ◽  
Vol 125 ◽  
pp. 46-55
Author(s):  
Jon Shields
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Financial Institutions ◽  
Balance Sheets ◽  
Household Credit ◽  
The Way

It is often postulated that the reintroduction of credit controls would be neither effective nor politically possible. Major changes have been implemented over the last eight years both in the way that financial markets work (domestically and internationally) and in the conduct of monetary policy. Controls over either the size of the balance sheets of financial institutions or the terms under which customers can obtain loans would seem to run totally counter to these developments. Does this rule them out completely?

scholarly journals Recent Macroeconomic Dynamics and Agriculture in Historical Perspective

2010 ◽  
Vol 42 (3) ◽  
pp. 467-476 ◽  
Author(s):  
David Orden
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Exchange Rates ◽  
Interest Rates ◽  
Public Discourse ◽  
Historical Perspective ◽  
Macroeconomic Dynamics ◽  
The Past ◽  
Misery Index

This article explores the similarities, differences, and implications from the 1970s-1980s experience for the macroeconomic dynamic that may arise from the 2008 price spike and subsequent recession. Role of monetary policy (deviations from Taylor rule) is assessed. This is an argument that has not been too prominent in public discourse about causes of the financial crisis or the policies undertaken to restore stability to financial markets and avoid an even deeper downturn than occurred. The “misery index” is compared across the past and recent macroeconomic events. Effects on agriculture of exchange rates are reviewed, effects dependent on currency values and interest rates that can change quickly and in unexpected ways.

scholarly journals MONETARY POLICY IMPLEMENTATION FRAMEWORKS: A COMPARATIVE ANALYSIS

2010 ◽  
Vol 15 (S1) ◽  
pp. 145-189 ◽  
Author(s):  
Antoine Martin ◽  
Cyril Monnet
Keyword(s):  
Monetary Policy ◽  
Comparative Analysis ◽  
Policy Implementation ◽  
Central Bank ◽  
Open Market ◽  
Implementation Framework ◽  
Friedman Rule ◽  
Excess Reserves ◽  
Implementation Of Monetary Policy

We compare two stylized frameworks for the implementation of monetary policy. The first framework relies only on standing facilities, whereas the second framework relies only on open-market operations. We show that the Friedman rule cannot be implemented when the central bank uses standing facilities only. For a given rate of inflation, we show that standing facilities unambiguously achieve higher welfare than just conducting open-market operations. We conclude that elements of both frameworks should be combined. Also, our results suggest that any monetary policy implementation framework should remunerate both required and excess reserves.

Monetary Policy Under Labour

2010 ◽  
Vol 212 ◽  
pp. R15-R33 ◽  
Author(s):  
Timothy Besley ◽  
Kevin Sheedy
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Markets ◽  
Conceptual Framework ◽  
Inflation Targeting ◽  
Banking System ◽  
The Face ◽  
The Uk ◽  
Monetary And Fiscal Policy

This paper analyses Labour's record on monetary policy and the record of the MPC which it created. The paper begins by discussing the conceptual framework and institutions behind inflation targeting as it operates in the UK. We then discuss the successes that it enjoyed up to 2007 and debate the lessons that are being learned as a consequence of the experience since then. We then raise some of the formidable challenges that UK monetary policy must now face up to including maintaining the credibility of the inflation targeting regime in the face of greater interdependence between monetary and fiscal policy, and between monetary policy and support to the banking system and financial markets.

scholarly journals Monetary Policy Implementation in the Context of International Integration during the Period 2011-2020

2014 ◽  
Vol 220 ◽  
pp. 41-59
Author(s):  
Hoàng Trần Huy ◽  
Trúc Liễu Thu ◽  
Huân Nguyễn Hữu
Keyword(s):  
Monetary Policy ◽  
World Economy ◽  
Descriptive Statistics ◽  
Transmission Mechanism ◽  
Var Model ◽  
Macroeconomic Variables ◽  
The Past ◽  
Policy Transmission ◽  
Regulatory Instruments ◽  
Implementation Of Monetary Policy

The research tries to systematize basic problems with implementation of monetary policy, provide an overall estimate of the implementation of this policy by the SBV over periods, test and measure monetary policy transmission to identify major regulatory instruments, and suggest measures to maximize effects of the transmission mechanism of the monetary policy from 2014 to 2020 when Vietnam gradually integrates into the world economy. The research combines the descriptive statistics and VAR model to analyze each specific target in the period from 1990 to present time. The results show that the SBV has changed to employment of indirect instruments from direct ones and reduced commands or directions as an administrative body. The monetary policy in the past, however, was not very effective, which showed itself in the fact that changes in money supply did not produce strong effects on such variables as inflation and gross output. Among instruments for the monetary policy, exchange rate and refinancing rate are considered important in curbing inflation, and required reserve has great effects on economic growth, while the research finds no evidence of effects of credit limit set by the SBV on macroeconomic variables.

scholarly journals Management Of Banking System Liquidity In The Czech Republic

2011 ◽  
Vol 10 (1) ◽  
Author(s):  
Karel Bruna
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Structural Changes ◽  
Banking System ◽  
Policy Instruments ◽  
The Czech Republic ◽  
Excess Reserves ◽  
Excess Liquidity ◽  
Volatility Analysis ◽  
Implementation Of Monetary Policy

Implementation of monetary policy assumes that monetary policy instruments stabilize O/N interest rates to the proximity of main policy rate to achieve monetary targets. The function of stabilizing mechanism is based on simple rule that the volume of liquidity in the banking system is held in line with the demand of banks for reserves. In this paper main factors of banking system liquidity are analyzed in the context of bank’s imperfect intertemporal substitution of reserves and with respect to predictibility of O/N interest rates volatility. Analysis of O/N PRIBOR and CZEONIA reference interest rates prove Czech National Bank’s ability to stabilise O/N interest rates disregard overall excess liquidity in the banking system. It also identified structural changes acting in the money market like reduced instability of demand for reserve and decreased volatility of O/N interest rates due to intdroduction of credit facility or increased volatility of the spread between O/N interest rates and repo rate due to reduction of frequency of repo tenders. Rapid increase in the volatility of differences between OMO target and bank’s supply of excess reserves is also resulting in the weakening of a direct relationship between O/N PRIBOR dynamics and repo tenders.

scholarly journals The impact of monetary policy on Islamic bank financing: bank-level evidence from Malaysia

2018 ◽  
Vol 23 (46) ◽  
pp. 306-322 ◽  
Author(s):  
Muhamed Zulkhibri
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Banking System ◽  
Bank Lending ◽  
Islamic Banks ◽  
Content Type ◽  
Islamic Bank ◽  
Bank Financing ◽  
Significant Difference ◽  
The Impact

Purpose This paper aims to examine the distributional differences of Islamic bank financing responses to financing rate across bank-specific characteristics in dual banking system. The study also aims to provide understanding of how efficiently Islamic banks perform their roles as suppliers of capital for businesses and entrepreneurs. Design/methodology/approach The study uses panel regression methodology covering all Islamic banks in Malaysia. The study estimates the benchmark model for Islamic bank financing with respect to bank characteristics and monetary policy. Findings The evidence suggests that bank-specific characteristics are important in determining Islamic financing behaviour. The Islamic financing behaviour is consistent with conventional lending behaviour that the Islamic bank financing operates depending on the level of bank size, liquidity and capital. There is no significant difference between Islamic bank financing and conventional bank lending behaviour with respect to changes in monetary policy. Originality/value Many problems and challenges relating to Islamic financing instruments, financial markets and regulations must be addressed and resolved. In practice, it would be a good idea if Islamic banks move away from developing debt-based instruments and concentrate more efforts to develop profit and loss sharing instruments.

Sign in / Sign up

Export Citation Format

Share Document