scholarly journals Measuring the Quality of Money

2021 ◽  
Author(s):  
Vytautas Žukauskas
Keyword(s):  
Monetary Policy ◽  
Price Level ◽  
Central Banks ◽  
Composite Indicator ◽  
Institutional Framework ◽  
Demand For Money ◽  
Gradual Decline ◽  
Monetary System ◽  
Separate Channel

This article explains the theoretical importance of the quality of money as a factor of the demand for money and develops the composite indicator that measures the quality of money for the eurozone. The demand for money, i.e., the amount of money people keep in their balances, besides other well-known factors (e.g., interest rate, price level, and income) depends on how people subjectively perceive a particular money’s ability to serve its main functions: a medium of exchange, a store of value, and the unit of account. These properties depend not only on the instruments of monetary policy and the extent to which they are used, but also on the institutional framework of the monetary system. The article suggests that the quality of money is influenced by the institutional framework and monetary policy and that thus the quality of money is a separate channel for the transmission of money policy that works not through the usual mechanism of changing the supply of money, but through central banks affecting the demand for money. An important contribution of this article is that it develops an empirical composite indicator, which measures the quality of money in the eurozone in 1999–2019 and shows the gradual decline in the quality of euro.

The czech experience with inflation targeting in transition

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Kateřina Šmídková ◽  
Miroslav Hrnčíř
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Inflation Targeting ◽  
Central Banks ◽  
Communication Strategy ◽  
The Other ◽  
Short Term ◽  
Countries In Transition ◽  
The One

This paper argues that inflation targeting is a strategy that can be under certain conditions adopted by central banks in countries in transition even though their typical goal is to disinflate instead of stabilising low inflation. On the one hand, according to the Czech experience, inflation targeting offers several benefits, such as increasing control over expectations and short-term flexibility of monetary strategy, that are attractive for economy in transition. On the other hand, constraints imposed by period of transition as well as by openness of economy are present no matter which monetary strategy is chosen by the central bank. Implied costs should not be attributed to a particular monetary strategy. Inflation targeting has made various factors constraining monetary policy more visible and, as a result, requirements on the quality of decisions as well as on communication strategy have increased.

scholarly journals Inflation targeting and its discontents: The case of Poland

2015 ◽  
Vol 65 (s1) ◽  
pp. 107-122
Author(s):  
Piotr Ciżkowicz ◽  
Andrzej Rzońca
Keyword(s):  
Monetary Policy ◽  
Research Agenda ◽  
Inflation Targeting ◽  
Price Level ◽  
Central Banks ◽  
Eu Accession ◽  
General Evaluation ◽  
National Bank ◽  
Leaning Against The Wind ◽  
High Uncertainty

The paper provides a general evaluation of inflation targeting in Poland with some reference to challenges faced by major central banks. First, it argues that inflation targeting has proved to be relatively successful in Poland and attributes this success to a bias towards the aggressive mitigation of inflationary risks, whenever they have arisen. Second, it briefly explains why the National Bank of Poland does not need to search for an alternative to inflation targeting. Then, it presents the negative aspects of the price level targeting and nominal GDP targeting. Third, it refers to the post- EU accession experience of Poland as being supportive for the “leaning against the wind” approach to monetary policy conducting. Fourth, it argues that such an approach is supported by evidence on the effects of the crisis’ outburst and aggressive interest rate cuts on trust in central banks. Fifth, it indicates the determinants of slow post-crisis restructuring and persistently high uncertainty as desired priorities in the research agenda in central banks.

scholarly journals Politica monetaria, prezzo degli asset e ciclo immobiliare

2021 ◽  
pp. 361-379
Author(s):  
Gaetano Elnekave
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
Banking Sector ◽  
Free Market ◽  
Jel Classification ◽  
Real Economy ◽  
Credit Expansion ◽  
Monetary System ◽  
Asset Bubble

Asset prices depend on monetary policy of credit expansion. This mechanism is the trigger of economics cycle (boom and bust) that eventually leads the production structure to get narrower and to capital destruction. CBs have a dilemma: after an asset bubble explosion, doing again with policy of credit expansion (the same that produced the cycle) to fight de-flationary effects, above all in banks balance sheets, or trying to prevent the asset bubble explosion throughout QE policies, endangering real economy with inflationist pressures. That is a dilemma without solution. The solution is the elimination of CBs, the return to real money in a free market environment, with an unadulterated gold standard and the respect of traditional principles of contract in the banking sector. We need study the monetary system in terms of quality of money and not according the Quantity Theory of Money. Key words: Monetary Policy, Asset Prices, Asset Bubbles, Business Cycles, Housing Market, Quality of Money vs Quantity of Money. JEL Classification: E2, E21, E3, E32; E42, E5, E52, R31. Resumen: Los precios de los activos dependen de la política monetaria de expansión. Éste mecanismo es el desencadenante del ciclo económico que lleva a un estrechamiento de la estructura productiva y a la destrucción de los bienes de capital. Los bancos centrales se encuentran frente a un dilema: tras la explosión de la burbuja, o actuar con políticas de expansión para evitar las consecuencias de la deflación monetaria en particular sobre los balances de los bancos, o intentar evitar la explosión de la burbuja con más inyección de crédito, pero con el peligro de inflación de los precios en la economía real. Se trata de un dilema sin solución. La solución para eliminar los ciclos es la desaparición de los bancos centrales, el retorno a la «mo - neda-sana», al libre mercado, al patrón oro y al respeto de los principios tradicionales del derecho en el sector bancario. El análisis hay que efectuarlo no en terminos de la cantidad ideal de dinero, sino en terminos de la «ca-lidad» del mismo. Palabras clave: Política Monetaria, Precios de los Activos, Burbujas, Ciclos Económicos, Mercado Inmobiliario, Calidad de la Moneda vs Cantidad de la Moneda. Clasificación JEL: E2, E21, E3, E32; E42, E5, E52, R31.

scholarly journals The Science of Monetary Policy: An Imperfect Knowledge Perspective

2018 ◽  
Vol 56 (1) ◽  
pp. 3-59 ◽  
Author(s):  
Stefano Eusepi ◽  
Bruce Preston
Keyword(s):  
Monetary Policy ◽  
Rational Expectations ◽  
Price Level ◽  
Policy Design ◽  
Central Banks ◽  
New Keynesian ◽  
Interest Rate Policy ◽  
Imperfect Knowledge ◽  
Knowledge Perspective ◽  
Rate Policy

This paper reevaluates the basic prescriptions of monetary policy design in the new Keynesian paradigm through the lens of imperfect knowledge. We show that while the basic logic of monetary policy design under rational expectations continues to obtain, perfect knowledge and learning can limit the set of policies available to central banks, rendering expectations management in general more difficult. Nonetheless, the desirability of some form of price-level targeting, inducing inertia in interest-rate policy, paramount under rational expectations, is robust to the assumption of imperfect knowledge. (JEL D84, E13, E31, E52, E58)

scholarly journals Governance of Central Banks as an Entry Point to Establish the Credibility of Monetary Policy

2017 ◽  
Vol 1 (2) ◽  
pp. 120-142
Author(s):  
Haidar Hamza Judy ◽  
Noufel Smaili .
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Central Bank ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Institutional Framework ◽  
Policy Management ◽  
Multiple Goals ◽  
Effectiveness Of Monetary Policy

Since the recent Global Financial Crisis, Central Banks Have extensive Powers and Objectives include both Monetary Sability and Financial Stability. Which required new arrangements for the Governance of Central Banks and the design of a new Institutional Framework to restrict the use of power by focusing on Independence, Accountability and Transparency. Perception of individuals to risks resulting from shifts in Monetary Policy because of the change in the multiple goals weakens the degree of the effectiveness and acceptance. As the Central Bank is responsible for Monetary Policy management, identify orientations, objectives and choose the appropriate means, it works to ensure the effectiveness of Monetary Policy, and for that warrant provided on the Independence, Accountability, and Respect for the Principles of Transparency, So the application of Banking Governance..

scholarly journals The Selected Aspects of Application of Monetary Policy in the Economic and Monetary Union Pre-and-Post 2008

2014 ◽  
Vol 4 (2) ◽  
Author(s):  
Marek Vojtaššák
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Governance Structure ◽  
Central Banks ◽  
The European Union ◽  
Legislative Power ◽  
Monetary System ◽  
The One ◽  
Definition Of ◽  
The Eu

Abstract Purpose of the article is to present in two parts the selected aspects of application of monetary policy in the euro area pre and post 2008 as well as insitutional adaptations brought by the EU legislator. Methodology/methods In order to better explain these points, the article relies partially on a comparison with the framework and application of the monetary policy by the Federal Reserve as well as on a historic method when outlining the influence of definition of financial stability from the ECB/Eurosystem towards other prominent central banks. Scientific aim The article presents selected aspects of the monetary policy in the part of the EU where single currency was introduced in order to outline state of the art governance structure as well as a certain institutional creativity in application of powers conferred upon the central banks by the Treaty on the Functioning of the European Union and Protocol on the Statute of the European System of Central Banks and of the European Central Bank. The goal is to prove (i) the hypothesis of robustness of the framework and (ii) present the limits that can only be pushed further by the legislative power. The conclusions confirm on the one hand that the framework of monetary policy based on strong institutional safeguards such as legislative power and independence is very resilient and can prove efficient and creative enough to stabilise an innovative monetary system, however, on the other hand, validate the hypothesis that certain adaptations can only be performed on the basis of a legislative adaptations.

New Chicago Views on Inflation Control: The Neo-Fisherian Approach and the Fiscal Theory of the Price Level

2019 ◽  
Vol 52 (1) ◽  
pp. 69-87
Author(s):  
Peter Spahn
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
Interest Rates ◽  
Real Interest Rate ◽  
Price Level ◽  
Central Banks ◽  
Jel Classification ◽  
Inflation Target ◽  
Long Run ◽  
Nominal Interest Rates

Abstract Whereas in former times, the ‘Chicago View’ in monetary policy stood for the Quantity Theory and money supply control, it is now the centre of unconventional approaches in macro theory. The Neo-Fisherian proposal suggests, in the case of low inflation and nominal interest rates pegged to the zero-lower bound, to increase policy rates immediately to the long-run equilibrium value that corresponds to the ‘natural’ real interest rate and the inflation target. The Fiscal Theory of the Price Level believes that goods prices jump to a level that validates the long-run sustainability condition of government debt even if central banks abstain from monetising. Both views are criticized for analytical and empirical reasons. Zusammenfassung Während in früheren Zeiten die ‘Chicago-Sicht’ in der Geldpolitik für die Quantitätstheorie und das Konzept der Geldmengensteuerung stand, werden heute damit unkonventionelle Positionen in der makroökonomischen Theorie assoziiert. Der neue Fisher-Ansatz empfiehlt, im Fall niedriger Inflation und einer Beschränkung durch die Null-Zins-Grenze die Zentralbankzinsen direkt auf das Niveau anzuheben, dass durch den ‘natürlichen’ Realzins und die Zielinflationsrate bestimmt ist. Die Fiskalische Theorie der Preise behauptet, dass das Güterpreisniveau auf einen Wert springt, der die langfristige reale Tragfähigkeit der Staatsschulden sichert, selbst wenn die Notenbank keine Monetisierung betreibt. Beide Positionen können empirisch nicht überzeugen und werden einer analytischen Kritik unterzogen. JEL Classification: E52, E58

scholarly journals Central Banks’ Monetary Policy in the Face of the COVID-19 Economic Crisis: Monetary Stimulus and the Emergence of CBDCs

2021 ◽  
Vol 13 (8) ◽  
pp. 4242
Author(s):  
Miguel Ángel Echarte Echarte Fernández ◽  
Sergio Luis Náñez Náñez Alonso ◽  
Javier Jorge-Vázquez ◽  
Ricardo Francisco Reier Reier Forradellas
Keyword(s):  
Monetary Policy ◽  
Economic Crisis ◽  
International Monetary System ◽  
Central Banks ◽  
Monetary Policies ◽  
Monetary System ◽  
Blockchain Technology ◽  
Monetary Authorities ◽  
The Face ◽  
Rate Environment

This article analyzes the monetary policy of major central banks during the economic crisis generated by the COVID-19 pandemic. Rising public debt in many countries is being financed through asset purchases by monetary authorities. Although these stimulus policies predate the pandemic, they have been significantly boosted as many governments face large financing needs. We have been in a low interest rate environment for years and some governments have issued debt securities at negative rates. In addition, the rise of decentralized cryptocurrencies, based on blockchain technology, has created greater competition in the international monetary system and many governments have considered the creation of centralized virtual currencies, known as central bank digital currencies (CBDCs). We will analyze some relevant cases, with an emphasis on the digital euro project. The methodology is based on the analysis of the evolution of monetary variables. Pearson’s correlation will be used to establish some relationships between them. There is a strong similarity in the expansionary monetary policies of central banks. Although the growth of the money supply has not been passed on to the CPI, it has been passed on to the financial markets and the price of assets such as Bitcoin or gold.

The Dangers of Monetary Policy in Agrarian Economies

1961 ◽  
Vol 1 (3) ◽  
pp. 59-72 ◽  
Author(s):  
Richard C. Porter
Keyword(s):  
Monetary Policy ◽  
Side Effects ◽  
Central Bank ◽  
Money Supply ◽  
Price Level ◽  
Central Banks ◽  
Government Deficits ◽  
Permissive Attitude ◽  
The Creation ◽  
Central Bankers

The central banks of underdeveloped economies are frequently ad¬monished for their apparently permissive attitude toward inflation. Where large government deficits are financed by the creation of ever-larger money balances in the economy, this criticism is quite apt. But the strictures often extend to those central banks which, in a situation where prices have already risen for reasons beyond their control,1 are reluctant to refuse the accom¬modating expansion of the money supply. With the argument that the central bank can force prices back to their previous levels merely by insisting that the money supply does not increase, central bankers and their supporters have seldom disagreed. They justify permissive after-the-fact monetary expansions on the grounds that driving the price level back down would have unfortunate side effects.2

scholarly journals The Selected Aspects of Application of Monetary Policy in the Economic and Monetary Union Pre-And-Post 2008

2015 ◽  
Vol 5 (1) ◽  
pp. 36-46
Author(s):  
Marek Vojtaššák
Keyword(s):  
Monetary Policy ◽  
Financial Stability ◽  
Governance Structure ◽  
Central Banks ◽  
The European Union ◽  
Legislative Power ◽  
Monetary System ◽  
The One ◽  
Definition Of ◽  
The Eu

Abstract Purpose of the article is to present in two parts the selected aspects of application of monetary policy in the euro area pre and post 2008 as well as insitutional adaptations brought by the EU legislator. Methodology/methods In order to better explain these points, the article relies partially on a comparison with the framework and application of the monetary policy by the Federal Reserve as well as on a historic method when outlining the influence of definition of financial stability from the ECB/Eurosystem towards other prominent central banks. Scientific aim The article presents selected aspects of the monetary policy in the part of the EU where single currency was introduced in order to outline state of the art governance structure as well as a certain institutional creativity in application of powers conferred upon the central banks by the Treaty on the Functioning of the European Union and Protocol on the Statute of the European System of Central Banks and of the European Central Bank. The goal is to prove (i) the hypothesis of robustness of the framework and (ii) present the limits that can only be pushed further by the legislative power. The conclusions confirm on the one hand that the framework of monetary policy based on strong institutional safeguards such as legislative power and independence is very resilient and can prove efficient and creative enough to stabilise an innovative monetary system, however, on the other hand, validate the hypothesis that certain adaptations can only be performed on the basis of a legislative adaptations.

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