scholarly journals Pakistan’s Monetary Policy: Some Fundamental Issues

2017 ◽  
Vol 56 (1) ◽  
pp. 31-58 ◽  
Author(s):  
Zafar Hayat
Keyword(s):  
Monetary Policy ◽  
Conflicts Of Interest ◽  
Policy Decision ◽  
Policy Formulation ◽  
Central Banking ◽  
Jel Classification ◽  
Price Stability ◽  
Inflation Expectations ◽  
Academic Qualification ◽  
Institutional Capacity Building

Over the last three decades, the landmark transformation of central banks from secrecy to openness and transparency has significantly enhanced their performance to successfully anchor inflation expectations and achieve price stability. The extent of such a transformation of the State Bank of Pakistan (SBP), especially in terms of statutory objectives, monetary policy mandate, conflicts of interest, disclosures, and dissemination of effective public economic information is assessed vis-à-vis the current popular central banking practices. The assessment indicates that the SBP is yet to be transformed to be able to achieve price stability which is a cornerstone for the achievement of sustainable economic growth. On the statutory front, such a transformation requires amending the SBP Act 1956, in line with the statutes for the best monetary policy frameworks by; (1) making price stability as the overriding objective of the SBP; (2) putting in place a clear mechanism for its accountability against price stability, consistent inflation targets, and; (3) elimination of the cushion for government‘s involvement with the monetary policy decision making processes. Some of the other areas like, institutional capacity building of the SBP, in terms of the relevance and level of the academic qualification, research profiles, and experiences of the Board, higher as well as lower tier management need special attention. Such transformations may not only enhance assimilation, creation, sharing, and funnelling of existing as well as new knowledge into monetary policy formulation, but may help change the static mindset at the SBP, hence allowing the institution to flourish. JEL Classification: E5, E52, E58 Keywords: Statutory Objectives, Conflicts of Interest, Disclosures, SBP

scholarly journals Juan de Mariana y la política monetaria estadounidense moderna: Salamanca, Cervantes, Jefferson y la Escuela Austriaca

2021 ◽  
pp. 67-103
Author(s):  
Eric Clifford Graf
Keyword(s):  
Monetary Policy ◽  
Early Republic ◽  
The United States ◽  
Central Banking ◽  
Jel Classification ◽  
Thomas Jefferson ◽  
Monetary Policies ◽  
Don Quijote ◽  
Palabras Clave ◽  
School Of Salamanca

Juan de Mariana may have had more direct lines of influence on the contemporary political denunciation of central banking in the United States than previously thought. As the culmination of a series of monetary theorists of the School of Salamanca, Mariana’s genius was his ability to synthesize and articulate a critique of the inflationary monetary policies of the Spanish Habsburgs. Furthermore, the Jesuit scholar linked his economic analysis to his equally scandalous endorsement of regicide. For their part, both the monetary policy concerns and the rebellious animus of the modern libertarian wing of American politics echo Thomas Jefferson’s views during the early Republic. These views also likely owe something to Juan de Mariana’s uniquely menacing confrontations with the Habsburgs. And thanks to the Virginian’s lifelong appreciation of Cervantes’s great novel Don Quijote, which was itself heavily influenced by Mariana, the fascinating connections between Jefferson’s and Mariana’s politicized understandings of money are even further intertwined. Key words: Monetary Policy, Mariana, Jefferson, Cervantes, Austrian School, School of Salamanca, Libertarianism, Liberty, Slavery, Regicide, Billon Coins. JEL Classification: B1, B2, B3, N1 y N4. Resumen: Juan de Mariana pudo haber tenido una influencia más directa sobre la elaboración de las críticas contemporáneas a la banca central en EE.UU. de lo que se ha pensado hasta ahora. Esta influencia puede encon-trarse en el punto culminante de la teoría monetaria de la Escuela de Sala-manca, cuando Mariana sintetizó y articuló una ingeniosa crítica de las políticas inflacionarias de los Habsburgo. En esa crítica, el erudito jesuita vinculó su análisis económico con la no menos escandalosa defensa del regicidio. Tanto las preocupaciones monetarias como el ánimo rebelde del ala libertaria de la derecha estadounidense se hacen asimismo eco de las opiniones expresadas por Thomas Jefferson durante los primeros años de la República. Y esas opiniones, probablemente, también deban algo a los amenazadores enfrentamientos que tuvo Juan de Mariana con los Habsbur-go. Y finalmente, gracias a la admiración que el político de Virginia sentía por El Quijote de Cervantes, texto que a su vez fue fuertemente influenciado por Mariana, se continúan entretejiendo las fascinantes conexiones entre las preocupaciones sobre las políticas monetarias expresadas por Jefferson y Mariana. Palabras clave: Política Monetaria, Mariana, Jefferson, Cervantes, Escuela Austriaca, Escuela de Salamanca, Libertarismo, Libertad, Esclavitud, Regicidio, Moneda de Vellón. Clasificación JEL: B1, B2, B3, N1 y N4.

Trust, But Verify: The Road Ahead

2017 ◽  
Author(s):  
Pierre L. Siklos
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Policy Instruments ◽  
Central Banks ◽  
Central Banking ◽  
Price Stability ◽  
The Road ◽  
The Past ◽  
Economic Downturns ◽  
More Care

Taking stock of the past fifteen years in monetary policy leads to some conclusions and suggestions for reform. Contrary to the claims of some observers, price stability remains an unassailable goal of central banks. Reforms are needed in their governance, however. In particular, legislation ought to include more directives to make clear the conditional relationship between government and the central bank. Unconventional central bank policies are no longer so unconventional. While they should be included in the toolkit of policy instruments, they should be used with more care. Some central banks have overreached and have confused the need to put a floor on economic downturns with the need for economic growth to rise to levels deemed normal. Data dependence as a policy stance reflects one of the biggest failures of central banking. After more than a decade of explaining the forward-looking nature of monetary policy, a backward-looking perspective seems to dominate policy discussions.

Analysis of heterogeneity of inflation expectation based on genetic algorithm and time series model

2020 ◽  
pp. 1-11
Author(s):  
Haoyang Tan ◽  
Qiang Zhang
Keyword(s):  
Genetic Algorithm ◽  
Monetary Policy ◽  
Selection Process ◽  
Great Influence ◽  
Search Space ◽  
Policy Formulation ◽  
Practical Significance ◽  
Inflation Expectations ◽  
Inflation Expectation ◽  
Overlap Model

The heterogeneity of inflation expectations, especially the residents’ inflation expectations, has a great influence on controlling the actual inflation rate and the effective implementation of my country’s monetary policy. In the process of monetary policy formulation, the monetary authorities need to pay more attention to the heterogeneous expectations among microeconomic individuals. This paper introduces the genetic algorithm, a new artificial intelligence method, to analyze the demand for the heterogeneity of inflation expectations and explains the basic steps to use it and how to apply it to explain problems in economics. Moreover, this paper uses a genetic algorithm-based generation overlap model to simulate the dynamic evolution of inflation heterogeneity among residents and the equilibrium selection process of price levels in a wide search space. The results of the simulation experiment show that it is of practical significance to use genetic algorithms to simulate the dynamic process of the heterogeneity of residents’ inflation expectations.

Do Inflation Expectations Matter for Inflation Forecastability: Evidence from Pakistan

2016 ◽  
Vol 55 (3) ◽  
pp. 211-225 ◽  
Author(s):  
Fayyaz Hussain ◽  
Zafar Hayat
Keyword(s):  
Monetary Policy ◽  
Predictive Ability ◽  
Jel Classification ◽  
Inflation Expectations ◽  
Forecast Performance ◽  
Inflation Forecasts ◽  
Forward Guidance ◽  
Forecasting Performance ◽  
Out Of Sample ◽  
Effectiveness Of Monetary Policy

We empirically investigate if the incorporation of inflation expectations helps improve the forecasting performance of a suite of univariate inflation models. Since inflation forecasts are instrumental to the conduct of an effective monetary policy, any possible improvement in the inflation forecastability may tend to enhance the effectiveness of monetary policy—by providing forward guidance both to the monetary authority and the market to effectively anchor inflation expectations. Our results are robust across specifications of our baseline models, sample sizes and forecast horizons. The introduction of inflation expectations, whether contemporaneously or with a 6-months lead improves the predictive ability—both in-sample and out-of-sample for 6 and 12-month horizons. Deterioration however is observed for a 3- month horizon, which point towards the weak representation of the expectations data for a 3- month horizon. JEL Classification: E31, E37 Keywords: Inflation-expectations, Forecast-performance, Pakistan.

Central Bank Communications and Professional Forecasts: Evidence From India

2021 ◽  
pp. 097265272110440
Author(s):  
Ashima Goyal ◽  
Prashant Parab
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Jel Classification ◽  
Inflation Expectations ◽  
Speed Of Adjustment ◽  
Inflation Forecasts ◽  
Monetary Policy Committee ◽  
Reserve Bank ◽  
Policy Statements ◽  
Repo Rate

We analyze the influence of qualitative and quantitative communications of the Reserve Bank of India (RBI) on inflation expectations of professional forecasters and draw out implications for policy. Estimating Carroll-type epidemiological models of expectation formation under information rigidities, we get a large speed of adjustment of professional forecasters’ expectations. Analysis of the determinants of inflation forecasts, inflation surprises, and forecaster disagreement reveals significant influence of quantitative RBI communications in the form of inflation projections. This effect is prominent for shorter-horizon forecasts and after adoption of flexible inflation targeting. Macroeconomic fundamentals like lagged inflation and repo rate also significantly influence inflation forecasts. Choice of words in the RBI monetary policy statements has more impact after October 2016, when the monetary policy committee became the decision-making body. JEL Classification: E31, E52, E58

scholarly journals THE INFLUENCE OF DECISIONS ON INCREASING SOCIAL STANDARDS ON MONETARY POLICY

2021 ◽  
Vol 2 (37) ◽  
pp. 37-46
Author(s):  
S. Kolodii ◽  
M. Rudenko ◽  
L. Gariaga ◽  
I. Kochuma ◽  
S. Kolodii
Keyword(s):  
Monetary Policy ◽  
Minimum Wage ◽  
Inflation Targeting ◽  
Jel Classification ◽  
Inflation Expectations ◽  
Good Decision ◽  
Economic Agents ◽  
Social Standards ◽  
The Government ◽  
Fiscal And Monetary Policy

Abstract. Raising social standards is an essential instrument of social policy by the state. However, the decision to raise the minimum wage rather sharply should consider its impact on fiscal and monetary policy. The article aims to study how government decisions on social standards (in particular minimum wages) can influence monetary policy decisions based on inflation targeting. Results of the research. The method of analysis of indicators and consequences of the introduction of inflation targeting in Ukraine, geographical neighbors and countries with similar economies is described. It is determined that the final effect of changes in social standards on inflation depends on the entire transmission mechanism, which includes several interrelated reactions, and maybe stretched over time, depending on both the speed of transmission of the impulse and the specifics of institutional regulation. It is established that the criterion for a dramatic increase in the minimum wage is a significant upward shift of the minimum wage to the average wage ratio curve. In this case, as we have shown, inflation expectations worsen, which modifies somewhat the behaviour of economic agents and is transferred to current inflation rates in the future. Raising social standards is a good decision of the government in order to maintain household incomes. However, to ensure the neutrality of such a decision for fiscal and monetary policy, it needs to be aligned with its objectives and strategies. Keywords: social standards, monetary policy, inflation targeting, minimum wage, GDP, government. JEL Classification Е 600 Formulas: 0; fig.: 3; tabl.: 1; bibl.: 17.

scholarly journals „Formalizing the future: How central banks set out to govern expectations but ended up (en-)trapped in indicators“

2018 ◽  
Author(s):  
Timo Walter
Keyword(s):  
Monetary Policy ◽  
Social Relations ◽  
Inflation Targeting ◽  
Central Banking ◽  
Inflation Expectations ◽  
Economic Activities ◽  
Social Coordination ◽  
The Future ◽  
Tightly Coupled ◽  
Economic Expectations

Modern ‘inflation targeting’ monetary policy has been one of the prototypes of future-oriented modes of social coordination which in recent years have captured the sociological imagination. Modern central banking is commonly presented as achieving greater efficacy by directly managing economic expectations, in particular when contrasted with the previous heavy-handed, “hydraulic” transmission of policy objectives through systems of economic aggregates. Such empirical claims are mirrored in the theoretical distinction drawn by sociologists between the openness and efficacy of future-oriented coordination of expectations, and the more rigid coordination achieved through formal organizing and formalization.This paper uses the case of the US Federal Reserve’s (Fed) transition to inflation targeting in the 1980s to show how the precision and flexibility of social coordination through expectations in fact relies on extensive formalization and rigid proceduralization. I show that the tightly coupled control relation on which inflation targeting rests is not possible without the constitutive exclusion of other modes of representing and intervening the economy achieved by this formalization. However, the price for the robust and precise reactivity that modern central banking has constructed between key indicators of inflation expectations and the interest rate set by monetary policy, is a comprehensive procedural dis-embedding of monetary policy from the structure of economic activities whose path into the future it is meant to govern.The paper concludes that in order to better understand the conditions under which future-oriented modes of coordination fail or succeed, we need to study more closely the formalization of social relations on which they are founded.

scholarly journals Income Velocity of Money: A Case Study of Pakistan

1974 ◽  
Vol 13 (2) ◽  
pp. 145-157 ◽  
Author(s):  
Mohammad Zubair Khan
Keyword(s):  
Monetary Policy ◽  
Private Sector ◽  
Control Policy ◽  
Policy Formulation ◽  
Price Stability ◽  
Control Policies ◽  
Monetary Expansion ◽  
Velocity Of Money ◽  
Short Run

The aim of this paper is to analyse the policy of monetary expansion followed in Pakistan and examine the effect it had on the price-stability in the economy. Credit control policies, whose main objective is to influence expenditures on domestic and foreign goods, is rendered ineffective to a certain degree by the use of the existing savings of the private sector. This use of the savings can be measured in terms of changes in the velocity of money. Since the effectiveness of credit control policy depends on the decisions of savers, an analysis of the short-run behaviour of income velocity is crucial to monetary policy formulation.

Credit Restriction or Economic Growth?

2019 ◽  
pp. 45-54
Author(s):  
E.Y. Sokolova ◽  
A.S. Tanasova
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Domestic Demand ◽  
Retirement Age ◽  
Inflation Expectations ◽  
Negative Consequences ◽  
Credit Restriction

At the end of 2018 — the very beginning of 2019 Russia faced negative consequences of the economic measures that took place in 2018, such as the retirement age rising, tightening sanctions against Russia, VAT rising which caused increased inflation expectations of people. The Bank of Russia increased the key rate in response. All these measures lead to decrease of domestic demand, and not stimulate economic growth. The article examines the possibility of using the monetary policy method of credit restriction to fulfil the presidential act to stimulate economic growth.

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