scholarly journals Discretion of the Monetary Policy: An Exemplification with Bolivia

2019 ◽  
Vol 66 (1) ◽  
pp. 101-115 ◽  
Author(s):  
Roger Alejandro Banegas Rivero ◽  
Marco Alberto Núñez Ramírez ◽  
Sacnicté Valdez del Ríoe
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Open Economy ◽  
Generalized Method Of Moments ◽  
Elastic Response ◽  
Output Gap ◽  
Open Market ◽  
Economic Cycle

Abstract In this paper, we evaluate and quantify the role of the discretion of the monetary policy in an open small and open economy (the case of Bolivia). The results suggest that conventional instruments of the Central Bank respond in different ways: interest rates present a sensitive/elastic response to output gap (actual economic cycle) [1.8]; an inelastic mechanism to inflation [0.5]. On the other hand, open market operations in the Central Bank responds elastically to inflation [1.2] and insensible to the output gap. These results are robust to alternative specification utilizing the Generalized Method of moments (GMM), for the quarterly period from 2000(T1)-2015(T4).

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 ROMANIAN INTERBANK INTEREST RATES AND CENTRAL BANK’S MONETARY POLICY

2019 ◽  
Vol 66 (4) ◽  
pp. 487-506
Author(s):  
Giovanni Verga ◽  
Nicoleta Vasilcovschi
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Central Banks ◽  
The European Union ◽  
European System ◽  
National Bank ◽  
Lending Rates ◽  
Main Determinants

Interbank rates are affected by the monetary policy of a country and represent a link to other financial and credit markets. In 2007, Romania became a member of the European Union and its central bank, the National Bank of Romania (NBR), joined the European System of Central Banks (ESCB) but not the Eurosystem. This paper analyses the role of the central bank and the use of its instruments concerning interbank rates. The research evaluates the influence of the Romanian Central Bank on interbank rates and shows that the policy rate and bank liquidity are among the main determinants of interbank rate movements. It is also presented that the NBR’s deposit and lending rates can limit the free movements of the interbank rate of interest. This research confirms that interbank interest rates influence bank rates strongly. The methodology used in this research includes cointegration, dynamic econometric measurement and analyses with Granger causality. Our research uses mainly ROBID and ROBOR of different maturities, showing that the influence of the Romanian Central Bank (NBR) on the interbank rate is strong, while the influence of the ECB and Fed is weak.

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 The Dependence of China’s Monetary Policy Rules on Interest Rate Regimes: Empirical Analysis Based on a Pseudo Output Gap

2019 ◽  
Vol 11 (9) ◽  
pp. 2557
Author(s):  
Xiaoyu Zhang ◽  
Fanghui Pan
Keyword(s):  
Growth Rate ◽  
Monetary Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Policy Preferences ◽  
Output Gap ◽  
Policy Rules ◽  
Monetary Policy Rules ◽  
Nominal Interest Rates

Although a large number of scholars have studied the policy preferences and monetary policy rules of China’s central bank, most have found no evidence that China’s central bank has adjusted the nominal interest rates against the output gap. By constructing the pseudo output gap defined by the deviation of the real output growth rate and the target growth rate, this paper finds that China’s central bank prefers to adjust the nominal interest rates against the pseudo output gap. The monetary policy preferences and rules of China’s central bank in different interest rate regimes are investigated based on the threshold Taylor rule model. It is found that, in the high-interest-rate regime, the central bank adjusts the nominal interest against the inflation gap and the pseudo output gap, while in the low-interest-rate regime, there is no evidence that the central bank adjusts the nominal interest rates against the pseudo output gap. The lower bound of interest rate reduction and the weakening of interest rate policy effects caused by the liquidity trap of the interest rate are the possible reasons for China’s central bank not to adjust the nominal interest rates against the pseudo output gap.

scholarly journals Deconstructing Monetary Policy Surprises— The Role of Information Shocks

2020 ◽  
Vol 12 (2) ◽  
pp. 1-43 ◽  
Author(s):  
Marek Jarociński ◽  
Peter Karadi
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Stock Prices ◽  
High Frequency ◽  
Structural Vector Autoregression ◽  
Role Of Information ◽  
Structural Vector ◽  
Economic Outlook

Central bank announcements simultaneously convey information about monetary policy and the central bank's assessment of the economic outlook. This paper disentangles these two components and studies their effect on the economy using a structural vector autoregression. It relies on the information inherent in high-frequency co-movement of interest rates and stock prices around policy announcements: a surprise policy tightening raises interest rates and reduces stock prices, while the complementary positive central bank information shock raises both. These two shocks have intuitive and very different effects on the economy. Ignoring the central bank information shocks biases the inference on monetary policy nonneutrality. (JEL D83, E43, E44, E52, E58, G14)

scholarly journals A Study on the Asymmetry in the Role of Monetary Policy by Using STR model

2014 ◽  
Vol 2 (3) ◽  
pp. 236-243
Author(s):  
Guihuan Zheng ◽  
Yan Shang ◽  
Ying Wu ◽  
Jue Wang
Keyword(s):  
Monetary Policy ◽  
Filter Method ◽  
Output Gap ◽  
Economic Cycle ◽  
Steady Growth ◽  
Monetary Shock ◽  
The Asymmetry ◽  
Hp Filter ◽  
The Impact

AbstractThe effects of monetary policy on the economy show different with respect to its direction, power and the different economic cycle. That is to say, there exists asymmetry in the role of monetary policy. It’s important to research this asymmetry for monetary policy making and keeping economy’s steady growth In this paper, we aim to study the asymmetry in the role of monetary policy with respect to the different economic cycle. First, monetary shock is estimated by using monetary gap and output gap is calculated via HP filter method. Second, based on the monetary gap and output gap, the asymmetric impacts of monetary gap are measured by STR model. The results show that the impacts of monetary shock on economy are asymmetrical significantly. The impact of monetary policy on economy in upturn stage is larger than its impact in downturn stage.

scholarly journals Determinanty normalizacji polityki monetarnej Europejskiego Banku Centralnego

2017 ◽  
pp. 175-188
Author(s):  
Irena Pyka ◽  
Aleksandra Nocoń
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Euro Area ◽  
European Central Bank ◽  
Balance Sheet ◽  
Open Market ◽  
Effect Analysis ◽  
European Central ◽  
Exit Strategies

Due to the implementation of non-standard monetary policy by the European Central Bank, concentrated in the first part of the financial crisis mainly on the unconventional open market operations, and in the second on the Quantitative Easing policy, the exit strategies and monetary policy normalization have become the subject of intensified discussion. The concept of a return to "normal" monetary policy of the ECB will require the implementation of two aspects: raising of interest rates and reduction of the size of central bank balance sheet. However, it is undisputed that the exit strategies of the ECB could be implemented only after completing of the asset purchase program and stabilization of euro area public finances. It seems that at this moment the monetary policy of Eurozone will have to wait. The main aim of the study is to identify the determinants of the monetary policy normalization of the European Central Bank. Particular attention will be paid to the conditions of normalization relating to the support for creation of economic recovery in the euro area, the increase of inflation towards the inflation target, stimulation of dynamics of lending activity and the situation on the financial market. The following research methods will be used: the literature studies, including domestic and foreign literature, case studies, cause and effect analysis, observation analysis as well as synthesis analysis. 

scholarly journals The role of the czech national bank monetary instruments in interest rates targeting during transition

2001 ◽  
Vol 10 (1) ◽  
Author(s):  
Zdeněk Dvorný
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Market Economy ◽  
Banking Sector ◽  
Free Market ◽  
Policy Instruments ◽  
National Bank

In this paper, the recent development of Czech interest rates during the Czech Republic's transition to a market economy is discussed. First, the situation in the economy and in the banking sector, as well as the monetary policy of the central bank during the period of 1990 - 1999 is presented. However, the main focus is on monetary policy instruments and their application during transition. The paper also describes the targeting of the central bank's policy by using direct limitations in banking during 1990 - 1991 and refinancing instruments exploited during the period of 1991 - 1992. Finally, the central bank's orientation towards free market operations, starting in 1993, is discussed.

scholarly journals Monetary Conditions Index: A Composite Measure of Monetary Policy in Pakistan

2002 ◽  
Vol 41 (4II) ◽  
pp. 551-566 ◽  
Author(s):  
Abdul Qayyum
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Open Economy ◽  
Bank Lending ◽  
Open Market ◽  
Short Term ◽  
Rate Effects ◽  
The Interest Rate

Accurate measures of the size and direction of changes in monetary policy are very important. A number of variables/indicators have been used as a measure of the stance of monetary policy the world over. These include growth rates of monetary aggregates and credit aggregates, short-term interest rate as used by Sims (1992), index of minutes of Federal Open Market Committee (FOMC), as suggested by Friedman and Schwartz (1963) and reintroduced by Romer and Romer (1989), monetary policy index constructed by employing Vector Autoregression (VAR) estimation technique with prior information from Central Bank such as Bernanke and Blinder (1992) and Bernanke and Mihov (1998), and Monetary Conditions Index (MCI)—which is the focus of this paper—constructed by and used by Bank of Canada [Freedman (1995)], taking into consideration the interest rate and exchange rate channel of monetary policy transmission mechanism in a small open economy. In case of open economy it is assumed that the monetary policy affects the economy and the prime objective of monetary policy, rate of inflation, through two important transmission mechanisms. These transmission channels are; interest rate channel and exchange rate channel. The working of the first channel is that the interest rate influences the level of expenditures, investment and subsequently domestic demand. The change in official interest rate effects the market rates of interest both short term as well as long term interest rates. This change in market rates of interest is transmitted to the bank lending rates and saving rates. The change in saving rate effects the spending behaviour of individuals (consumption) whereas the change in bank lending rate effects the investment behaviour of firms (investment). The change in aggregate consumption and investment has direct link to the gross domestic product (GDP).

scholarly journals How Important Are Foreign Shocks in a Small Open Economy? The Case of Slovakia

2009 ◽  
Vol 9 (1) ◽  
pp. 1850155 ◽  
Author(s):  
Roman Horvath ◽  
Marek Rusnak
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Open Economy ◽  
Small Open Economy ◽  
Monetary Shocks ◽  
Positive Role ◽  
Interest Rate Policy ◽  
Monetary Policy Shock ◽  
Foreign Shocks

In this article, we provide evidence on the nature and the relative importance of domestic and foreign shocks – with a focus on monetary shocks – in the Slovak economy based on the block-restriction vector autoregression model during the years 1999–2007. We document a well-functioning monetary transmission mechanism in Slovakia. Subject to various sensitivity checks, we find that contractionary monetary policy shock has a temporary negative effect on the degree of economic activity and price level. We find that using output gap instead of GDP alleviates the price puzzle. In general, prices are driven mainly by foreign factors and the European Central Bank monetary policy shock on Slovak prices is more powerful than that of the National Bank of Slovakia. The Slovak Central Bank interest rate policy seems to follow the ECB's interest rates. On the other hand, spectacular Slovak economic growth is primarily driven by domestic factors suggesting the positive role of recently undertaken Slovak economic reforms.

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