Central Banks, Monetary Policy, and the Return of Macroeconomics

2009 ◽  
Vol 26 (4) ◽  
pp. 14-19
Author(s):  
David DeRosa
Keyword(s):  
Monetary Policy ◽  
Central Banks

scholarly journals Central banks: Hesitant guardians of equilibrium

2018 ◽  
Vol 68 (s1) ◽  
pp. 125-139
Author(s):  
Jerzy Hausner ◽  
Andrzej Sławiński
Keyword(s):  
Monetary Policy ◽  
Best Practice ◽  
Financial System ◽  
Central Banks ◽  
Budget Constraint ◽  
Soft Budget Constraint ◽  
Intellectual Heritage ◽  
Inherent Tendency

In our paper we focus on situations when central banks have to conduct monetary policy in a world in which they cannot rely fully on what is regarded the best practice and they have to cope with financial system inherent tendency to be unstable. Both phenomena are rooted in János Kornai’s intellectual heritage highlighting that economy tends to divert from equilibrium and that soft budget constraint erodes economic actors’ behavior.

scholarly journals On the money creation approach to banking

2021 ◽  
Author(s):  
Salomon Faure ◽  
Hans Gersbach
Keyword(s):  
Monetary Policy ◽  
Commercial Banks ◽  
Central Banks ◽  
Capital Regulation ◽  
Bank Deposits ◽  
Central Bank Money ◽  
Money Creation ◽  
Asset Purchases ◽  
Bank Equity ◽  
Bank Money

AbstractWe study today’s two-tier money creation and destruction system: Commercial banks create bank deposits (privately created money) through loans to firms or asset purchases from the private sector. Bank deposits are destroyed when households buy bank equity or when firms repay loans. Central banks create electronic central bank money (publicly created money or reserves) through loans to commercial banks. In a simple general equilibrium setting, we show that symmetric equilibria yield the first-best level of money creation and lending when prices are flexible, regardless of monetary policy and capital regulation. When prices are rigid, we identify the circumstances in which money creation is excessive or breaks down and the ones in which an adequate combination of monetary policy and capital regulation can restore efficiency. Finally, we provide a series of extensions and generalizations of the results.

INFLATION TARGETING: IT'S NOT BROKE, IT DOESN'T NEED FIXING, BUT CAN IT SURVIVE?

2010 ◽  
Vol 01 (01) ◽  
pp. 59-80
Author(s):  
PIERRE L. SIKLOS
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Asset Price ◽  
Central Banks ◽  
Economic Downturn ◽  
Price Increases ◽  
The Global Financial Crisis ◽  
Nominal Anchor

Until the end of 2005 there were few outward signs that the inflation targeting (IT) monetary policy strategy was deemed fragile or that the likelihood of abandoning it was high. In light of the severe economic downturn and the global financial crisis that has afflicted most economies around the world since at least 2008, it is worth reconsidering the question of the fragility of the inflation targeting regime. This paper reprises the approach followed in Siklos (2008) but adds important new twists. For example, the present study asks whether the continued survival of IT is due to the fact that some of the central banks in question did take account of changes in financial stress. The answer is no. Indeed, many central banks are seen as enablers of rapid asset price increases. The lesson, however, is not that inflation targeting needs to be repaired. Instead, refinements should be considered to the existing inflation targeting strategy which has evolved considerably since it was first introduced in New Zealand 20 years ago. Most notably, there should be continued emphasis on inflation as the primary nominal anchor of monetary policy, especially in emerging market economies (EME), even if additional duties are assigned to central banks in response to recent events.

scholarly journals Testing for Asymmetric Central Bank Preferences

2018 ◽  
Vol 10 (4) ◽  
pp. 25
Author(s):  
Felix S. Nyumuah
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Developed Countries ◽  
Central Banks ◽  
Policy Implications ◽  
Less Developed Countries ◽  
Reaction Function ◽  
Policy Rule ◽  
Asymmetric Preferences ◽  
Policy Reaction Function

The linear specification of the ideal monetary policy reaction function has been questioned in recent times by researchers. They have suggested a nonlinear framework where central banks exhibit asymmetric behaviours. Despite the important policy implications of having asymmetric central bank preferences, studies have been on single-country basis focusing almost entirely on advanced economies. The aim of this study is to check the existence of asymmetric preferences on the part of central banks in the context of a panel of countries and not just a single a country. The study derives and estimates a nonlinear flexible optimal monetary policy rule, which permits zone-like as well as asymmetric behaviours using panel data from a range of countries both developed and less developed. Although the findings indicate the presence of asymmetric preferences on the output gap across less developed countries, generally, the evidence is in favour of a linear policy reaction function and symmetric central bank preferences. These findings mean that monetary policy is characterised by a linear policy rule and symmetric central bank preferences. The results also indicate that interest rate ‘smoothing’ reaction by monetary authorities is more pronounced in less developed countries than in developed ones.

scholarly journals Confidence in future monetary policy as a way to overcome the liquidity trap

2019 ◽  
Vol 5 (2) ◽  
pp. 117-135
Author(s):  
Olga Kuznetsova ◽  
Sergey Merzlyakov ◽  
Sergey Pekarski
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Time Consistency ◽  
Central Banks ◽  
Time Inconsistency ◽  
Liquidity Trap ◽  
Developed Economies ◽  
The Global Financial Crisis

The global financial crisis of 2007–2009 has changed the landscape for monetary policy. Many central banks in developed economies had to employ various unconventional policy tools to overcome a liquidity trap. These included large-scale asset purchase programs, forward guidance and negative interest rate policies. While recently, some central banks were able to return to conventional monetary policy, for many countries the effectiveness of unconventional policies remains an issue. In this paper we assess diverse practices of unconventional monetary policy with a particular focus on expectations and time consistency. The principal aspect of successful policy in terms of overcoming a liquidity trap is the confidence that interest rates will remain low for a prolonged period. However, forming such expectations faces the problem of time inconsistency of optimal policy. We discuss some directions to solve this problem.

scholarly journals MONETARY POLICY OF THE REPUBLIC OF KAZAKHSTAN

2019 ◽  
Vol 7 (5) ◽  
pp. 103-110
Author(s):  
Ilyasova Gulmira Garifollaevna ◽  
Bekmukhametova Assemgul Bauirzhanovna
Keyword(s):  
Sustainable Development ◽  
Monetary Policy ◽  
Central Banks ◽  
Inclusive Growth ◽  
External Shocks ◽  
Credit Policy ◽  
Methodological Research ◽  
National Bank ◽  
The Republic ◽  
Near Future

Purpose: Currently due to Kazakhstan's high vulnerability to external shocks, Kazakhstan needs new growth factors to accelerate and provide more inclusive growth. The National Bank of Kazakhstan, as the central bank, is responsible for the development and implementation of state monetary and credit policy within the framework of powers provided by current legislation. Objectives of monetary policy are primarily carried out to achieve this goal. Restoration of trust to actions of economic authorities is possible only if a balanced and responsible policy, supported by concrete actions and results, is implemented. Methodology: This study provides a literature review of domestic and foreign authors, who conducted the study of monetary policy of Central Banks of countries in various aspects of international experience.  The study gives an analytical overview of the current monetary policy of the Republic of Kazakhstan. Main Findings: The study discusses the importance of Kazakhstan’s monetary-credit regulation as only by means of effective monetary policy state can mitigate economic crises, restrain inflation growth and stimulate investments in various sectors of country's economy. The studies are systematized theoretical and methodological research aspects of the monetary policy of Kazakhstan of which the conclusions and recommendations proposed to improve the economy of our country. Implications/Applications:  This suggests that we should work in the near future, look for drivers of growth, so as to ensure not just an anti-crisis manual management of the economy, but to enter the rails of sustainable development.

scholarly journals Monetary Theory and Monetary Policy: Reflections on the Development over the last 150 Years

2013 ◽  
Vol 233 (3) ◽  
Author(s):  
Otmar Issing ◽  
Volker Wieland
Keyword(s):  
Monetary Policy ◽  
Financial System ◽  
Central Banks ◽  
The Political ◽  
Monetary Theory ◽  
Academic Discussion

SummaryIn this paper, we provide some reflections on the development of monetary theory and monetary policy over the last 150 years. Rather than presenting an encompassing overview, which would be overambitious, we simply concentrate on a few selected aspects that we view as milestones in the development of this subject.We also try to illustrate some of the interactions with the political and financial system, academic discussion and the views and actions of central banks.

scholarly journals Regular Econometric Model of Taylor for Albania

2016 ◽  
Vol 5 (1) ◽  
pp. 123
Author(s):  
Ergys Misha
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Interest Rates ◽  
Financial Stability ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Stock Exchange ◽  
Central Banks ◽  
Financial Assets

The Taylor’s Rule Central Banks is applying widely today from Central Banks for design the monetary policy and for determination of interest rates. The purpose of this paper is to assess monetary policy rule in Albania, in view of an inflation targeting regime. In the first version of the Model, the Taylor’s Rule assumes that base interest rate of the monetary policy varies depending on the change of (1) the inflation rate and (2) economic growth (Output Gap).Through this paper it is proposed changing the objective of the Bank of Albania by adding a new objective, that of "financial stability", along with the “price stability”. This means that it is necessary to reassess the Taylor’s Rule by modifying it with incorporation of indicators of financial stability. In the case of Albania, we consider that there is no regular market of financial assets in the absence of the Stock Exchange. For this reason, we will rely on the credit developmet - as a way to measure the financial cycle in the economy. In this case, the base rate of monetary policy will be changed throught: (1) Targeting Inflation Rate, (2) Nominal Targeting of Economic Growth, and (3) Targeting the Gap of the Ratio Credit/GDP (mitigating the boom cycle, if the gap is positive, and the contractiocycle if the gap is negative).The research data show that, it is necessary that the Bank of Albania should also include in its objective maintaining the financial stability. In this way, the contribution expected from the inclusion of credit gap indicators in Taylor’s Rule, will be higher and sustainable in time.

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