scholarly journals Forward guidance jako instrument polityki pieniężnej – możliwości wykorzystania

2015 ◽  
Vol 1 (3) ◽  
pp. 51-60
Author(s):  
Ilona  Skibińska-Fabrowska
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Central Banks ◽  
Communication Policy ◽  
Market Participants ◽  
Forward Guidance ◽  
Monetary Authorities ◽  
Effective Instrument ◽  
Targeting Strategy

Communication policy of central banks in the framework of direct inflation targeting strategy and related strategies is important. Its tools include forward guidance as a method of influencing the expectations of market participants. Although forward guid a method of influencing the expectations of market participants. Although forward guidance was used before the outbreak of the financial crisis, it was not popular. After 2008, under conditions of zero interest rate, monetary authorities have begun to use the forward guidance as an unconventional and effective instrument allowing monetary policy to have impact on market interest rates. However, the risks when using forward guidance include the possibility of misinterpretation of the conditional nature of the declaration of the monetary authorities. 

scholarly journals Ewolucja zmian i zadania banków centralnych w świetle doświadczeń kryzysu finansowego

2015 ◽  
Vol 1 (3) ◽  
pp. 35-50
Author(s):  
Agnieszka Alińska ◽  
Bogusław Pietrzak ◽  
Katarzyna Wasiak
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Central Banks ◽  
Communication Policy ◽  
Market Participants ◽  
Forward Guidance ◽  
Monetary Authorities ◽  
Effective Instrument ◽  
Targeting Strategy

Communication policy of central banks in the framework of direct inflation targeting strategy and related strategies is important. Its tools include forward guidance as a method of influencing the expectations of market participants. Although forward guidance was used before the outbreak of the financial crisis, it was not popular. After 2008, under conditions of zero interest rate, monetary authorities have begun After 2008, under conditions of zero interest rate, monetary authorities have begun to use the forward guidance as an unconventional and effective instrument allowing monetary policy to have impact on market interest rates. However, the riskswhen using forward guidance include the possibility of misinterpretation of the conditional nature of the declaration of the monetary authorities.

scholarly journals Inflation targeting: From “constrained discretion” to singularity

2020 ◽  
pp. 39-52
Author(s):  
Oleg Buklemishev
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Financial Stability ◽  
Inflation Targeting ◽  
Central Banks ◽  
Political Uncertainty ◽  
Policy Regime ◽  
Dynamic Inconsistency ◽  
Monetary Authorities ◽  
International Monetary Policy

In recent years, inflation targeting has become a staple of international monetary policy. The paper considers different challenges this monetary policy regime faces with regard to suppressed inflation, attaining the zero lower bound on the policy interest rates, and committing central banks to simultaneously pursue additional objectives such as financial stability. Inflation targeting has proved inefficient in raising inflation to the target zone from below, and unorthodox monetary policy tools have not proved their validity in this regard yet. As a result, monetary authorities are more inclined to discretion allowing them to compromise different aspects of “pure” inflation targeting. The value of this discretion is based on asymmetric information and boosted by additional functions assumed by central banks. However, it might bring about serious problems of dynamic inconsistency, compounded political uncertainty, and bureaucratic misconduct. Since none of the alternatives to inflation targeting currently looks fully satisfactory, it is concluded that the inflation targeting regime should be transformed to take into account the current situation, but a necessary precondition for the effectiveness of the new regime is enhanced accountability 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.

Lässt sich die Geldschöpfung der Geschäftsbanken noch kontrollieren? – Geldpolitik seit der jüngsten Finanzkrise 2007/2008

2018 ◽  
Vol 87 (3) ◽  
pp. 47-63
Author(s):  
Mathias Binswanger
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Interest Rates ◽  
Financial Crises ◽  
Commercial Banks ◽  
Central Banks ◽  
The Past ◽  
Monetary Authorities ◽  
Money Creation ◽  
Recent Financial Crisis

Zusammenfassung: Als Folge der jüngsten Finanzkrise ist der Einfluss der Zentralbanken auf die Geldschöpfung weitgehend verloren gegangen. Denn die Kontrolle über Reserven funktioniert nur solange, wie diese knapp sind und deren Bezug an bestimmte Bedingungen geknüpft werden kann. Seither halten die Geschäftsbanken in den ökonomisch wichtigsten Ländern de facto dermaßen viele Reserven, dass sie nicht mehr auf die jeweilige Zentralbank angewiesen sind. Diese Entwicklung lässt sich sowohl für die FED als auch für die EZB aufzeigen. Dies führt zu geldpolitisch neuen Herausforderungen, die bisher kaum beachtet wurden. Die Einflussmöglichkeit der Zentralbanken auf den Geldschöpfungsprozess der Geschäftsbanken wurde noch nie in so großem Stil ausgehebelt. Deshalb müssen Zentralbanken in Zukunft ihr Repertoire an geldpolitischen Massnahmen erweitern. Nur mit dem Drehen an der Zinsschraube wird man den Geldschöpfungsprozess in Zukunft kaum mehr in gewünschter Weise beeinflussen können. Summary: As a result of the recent financial crisis, the influence of central banks on money creation has largely disappeared. Controlling this process only works as long as money creation of commercial banks also leads to a need for additional reserves from the central bank. However, the large asset purchase programs of monetary authorities after the financial crises resulted in an enormous increase in reserves at commercial banks. Therefore, commercial banks have enough reserves to create additional money at large amounts and do not depend on central banks any more. This development is indicative for both the FED and the ECB. Therefore central banks face the challenge how they can restore their influence on the process of money creation. Just lowering or increasing interest rates, which was the major way of conducting monetary policy in the past, will not work anymore in the future.

scholarly journals Conducting Monetary Policy in South Asian Economies: An Investigation

2016 ◽  
Vol 55 (3) ◽  
pp. 161-190 ◽  
Author(s):  
Muhammad Arshad Khan ◽  
Ather Maqsood Ahmed
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Sri Lanka ◽  
Interest Rates ◽  
South Asian ◽  
Central Banks ◽  
Jel Classification ◽  
Monetary Authorities ◽  
Asian Economies ◽  
Exchange Rate Movements

Monetary policy which until recently aimed at targeting monetary aggregates has quietly given way to adjusting interest rates. Most of the Central Banks now focus on money reaction function that directly targets inflation or price level. This paper examines the way monetary policy is being conducted in the four major South Asian economies, namely, Bangladesh, India, Pakistan and Sri Lanka. The analysis is based on a variant of the Taylor rule framework. Using quarterly data over the period 1990Q1 to 2012Q4, the study finds that the monetary authorities in India, Pakistan and Sri Lanka have accommodated some degree of inflationary pressure, whereas Bangladesh has continuously smoothened interest rate while setting its monetary policy. Besides pursuing a mild monetary policy stance against inflation, India, Pakistan and Sri Lanka are also giving importance to foreign interest rate and real exchange rate movements to justify their relevance in monetary policy setting. However, the same has not been found to be true for Bangladesh. JEL Classification: E52, E58, E60 Keywords: Monetary Policy Rule, Central Banks, SAARC Countries

Central Bank Planning

2018 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Practical Reasoning ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers until recently drew a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralized knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy further into the future, these unconventional policies nevertheless mark a structural break—the return of hydraulic macroeconomic state agency, refashioned for a financialized economy. This chapter analyses the theoretical and practical reasoning behind this shift in the governability paradigm and examines the epistemic and reputational costs of modern central bank planning and the non-market setting of long-term bond prices.

Central Bank Communication

2019 ◽  
pp. 230-262
Author(s):  
Jakob de Haan ◽  
Jan-Egbert Sturm
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Inflation Expectations ◽  
Short Term ◽  
The Public ◽  
Central Bank Communication ◽  
Forward Guidance ◽  
The World ◽  
Future Direction

Many central banks in the world nowadays regard their external communication as an important tool to achieve their goals. This chapter provides an overview of the different ways in which central banks inform the public about the future direction of monetary policy and how successful they have been in recent years. Forward guidance is either part of a monetary policy strategy in which an explicit inflation target is targeted or is part of a strategy that attempts to circumvent the effective lower bound regarding the nominal interest rate. In both cases, forward guidance attempts to influence longer-term interest rates and inflation expectations through the expected future short-term interest rates.

scholarly journals Central bank planning: Unconventional monetary policy and the price of bending the yield curve

2017 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Yield Curve ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance ◽  
Central Bankers

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers used to draw a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralised knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy into the future, these unconventional policies nevertheless mark a structural break – the return of hydraulic macroeconomic state agency, refashioned for a financialised economy.

scholarly journals SAY NO TO INFLATION TARGETING: A CALL FOR THE ADAPTATION OF A ZERO-INTEREST REGIME

2021 ◽  
Vol 7 (3) ◽  
Author(s):  
Atiq Ur Rehman
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Full Employment ◽  
Central Banks ◽  
Policy Framework ◽  
Price Stability ◽  
Socioeconomic Indicators ◽  
Wide Range ◽  
The Impact

In its early history, monetary policy focused on numerous objectives, including stable growth, full employment, stable exchange rates and price stability. In the 1990s, many countries shifted their monetary policy framework from monetary aggregate/interest rate targeting to inflation targeting, in which inflation was regarded as the primary target of monetary policy, and interest rates the primary tool for achieving target inflation. Inflation targeting has diverted the focus of central banks from growth and employment to price stability. Unfortunately, there is considerable evidence which shows that inflation targeting frameworks are unable to control inflation in the way central banks want, and in fact lead to a greater departure from optimal growth and employment, the two key targets of sustainable development goals (SDGs). There is also evidence suggesting a strong association between inflation targeting and the move away from several other SDGs. Employing a systematic review of the related literature and Granger causality tests applied to data from various countries, this paper shows that inflation targeting fails to control inflation and has several undesirable impacts on a wide range of socioeconomic indicators. It is argued that the zero-interest regime is the optimal regime with respect to the impact on socioeconomic indicators, and also supports the interest free economy advocated by Islam.

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