Monetary Faith

2021 ◽  
Vol 6 (1) ◽  
Author(s):  
Philip Pilkington
Keyword(s):  
Twentieth Century ◽  
Economic Policy ◽  
Interest Rate ◽  
Central Bank ◽  
Monetary Economics ◽  
Central Banks ◽  
Important Variable ◽  
Economic Policymaking

The natural interest rate was the most important variable of monetary economics in the twentieth century. It has lingered in the background of economic policymaking, dictating the terms of debate for economic policy in general, and central bank policy in particular. The central banks pledge that if economists have enough faith in this unseen entity, we all will be the recipients of economic grace.

scholarly journals Comparison of the Approach of the Czech National Bank and the European Central Bank to the Effects of the Global Financial Crisis

2021 ◽  
Vol 10 (2) ◽  
pp. 18-46
Author(s):  
Andrea Cecrdlova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Financial Crisis ◽  
Central Bank ◽  
European Central Bank ◽  
Global Financial Crisis ◽  
Central Banks ◽  
European Central ◽  
National Bank ◽  
The Global Financial Crisis

The latest global crisis, which fully erupted in 2008, can have a significant impact on central banks credibility in the long run. During the last crisis, monetary authorities encountered zero interest rate levels and, as a result, started to use non-standard monetary policy instruments. The Czech National Bank decided to use a less standard instrument in November 2013, when it started to intervene on the foreign exchange market in order to keep the Czech currency at level 27 CZK / EUR. However, the European Central Bank also adopted a non-standard instrument, when chose a path of quantitative easing in 2015 in order to support the euro area economy by purchasing financial assets. The question remains whether the approach of Czech National Bank or the approach of European Central Bank in the crisis and post-crisis period was a more appropriate alternative. With the passage of time from the global financial crisis, it is already possible to compare the approaches of these two central banks and at least partially assess what approach was more appropriate under the given conditions. When comparing the central banks approaches to the crisis, the Czech National Bank was better, both in terms of the rate of interest rate cuts and the resulting inflation with regard to the choice of a non-standard monetary policy instrument. The recent financial crisis has revealed the application of moral hazard in practice, both on behalf of the European Central Bank and the Czech National Bank, which may have a significant impact on their credibility and independence in the coming years.

scholarly journals GOALS OF THE NATIONAL BANK OF SERBIA

2019 ◽  
pp. 091
Author(s):  
Srđan Golubović ◽  
Nataša Golubović
Keyword(s):  
Economic Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Central Banks ◽  
Domestic Legislation ◽  
National Bank ◽  
Policy Objectives ◽  
Legal Position ◽  
The Global Financial Crisis

Starting from the legal position of the National Bank of Serbia, the paper analyzes the objectives entrusted to this institution by domestic legislation. In line with the dominant monetary paradigm, the main goal of the central bank of Serbia is price stability. After the global financial crisis, financial stability is increasingly mentioned as the objective that central banks implement. This also applies to the central bank in Serbia (National Bank of Serbia), which has a clear mandate to take account of financial stability, in addition to monetary stability. Finally, as an important subject of economic policy, the National Bank of Serbia, by exercising the entrusted functions also affects the achievement of other economic policy objectives. It should be kept in mind that domestic legislation precisely determines the hierarchy of the objectives of the central bank, considering that it explicitly stipulates that the National Bank of Serbia primarily takes care of monetary and financial stability, and only then it provide support for general economic policy, provided that it does not jeopardize the exercise of the basic objectives.

scholarly journals Postacie alegoryczne umieszczone w szacie graficznej banknotów stumarkowych emitowanych przez banki Badenii, Bawarii, Saksonii i Wirtembergii przed I wojną światową

2017 ◽  
pp. 87-105
Author(s):  
Marcin Markowski
Keyword(s):  
Twentieth Century ◽  
Central Bank ◽  
Graphic Design ◽  
Central Banks ◽  
Federal States ◽  
Paper Money ◽  
Deutsche Mark ◽  
Nineteenth And Twentieth Centuries ◽  
Oak Leaves ◽  
Do So

After the unification of Germany in 1871, one of the unifying factors was the introduction of the single currency. The issuing bank was Reichsbank, which was based on a Prussian bank. From 1875, it issued coins and banknotes. Except for the central bank, however, the limited right to issue their own money was left to several provincial banks whose numbers were constantly decreasing. In the early twentieth century there were only four central banks of federal states. The banks of Baden, Bavaria, Saxony and Württemberg issued their own paper money until 1935 when they were deprived of their right to do so. Each of these institutions issued 100 Deutsche Mark banknotes whose graphic design differed from the appearance of Reichsbank’s paper money. Banknotes printed for these banks had a rich graphic design. It was not limited to simple ornamentation and symbols, but contained rich decoration in the form of allegorical figures ‘armed’ with the symbols of trade, crafts, agriculture and industry. Some of these characters and their attributes can be identified with specific Greek and Roman gods such as Hermes or Tyche. Among the figures appearing in the graphic design of the banknotes were women with wreaths of oak leaves on their heads, which may be interpreted as personifications of the states. Two busts have been identified as the symbolic rivers of Rhine and Neckar. The presence of allegorical characters is part of the global tendency during the nineteenth and twentieth centuries. At that time, images of deities and symbolic figures referring to the economy were commonly placed on banknotes in European countries and their overseas colonies.

Central Bank Digital Currency and Financial Stability in a Dual Banking System

2020 ◽  
pp. 233-252
Author(s):  
Hichem Hamza ◽  
Khoutem Ben Jedidia
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Financial Stability ◽  
Banking System ◽  
Central Banks ◽  
Peer To Peer ◽  
Payment Mechanism ◽  
Digital Currency ◽  
Pros And Cons ◽  
Open Question

The digitization of payment and the development of private digital currencies have constrained central banks to examine the issuance of their own central bank digital currency (CBDC) in order to face the competition of the new peer-to-peer payment system and the decline of cash use. This chapter addresses the topic of CBDC and places the discussion within the context of dual banking intermediation and financial stability. The design of CBDC in term of accessibility, anonymity, interest rate, and payment mechanism depends on the cryptocurrency use and money characteristics regarding the use of cash and deposit. The CBDC Sharia compliant, free of interest or PLS-based, fulfilling money value stability might be a solution. The effects of CBDC on banking intermediation and financial stability depend importantly on the CBDC design and switch significance of banks deposit to CBDC but remain an open question given the pros and cons arguments. In a dual banking system, Islamic banks could limit the disintermediation effect and maintain financial stability under Sharia compliance.

How the Federal Reserve's Central Bank Swap Lines Have Supported U.S. Corporate Borrowers in the Leveraged Loan Market

FEDS Notes ◽  
2020 ◽  
Vol 2020 (2802) ◽  
Author(s):  
Annie McCrone ◽  
◽  
Ralf Meisenzahl ◽  
Friederike Niepmann ◽  
Tim Schmidt-Eisenlohr ◽  
...  
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Foreign Exchange ◽  
Federal Reserve ◽  
Central Banks ◽  
Interest Rate Parity ◽  
Monetary Authorities ◽  
Rate Parity ◽  
In The Beginning ◽  
The Cost

The cost of borrowing U.S. dollars through foreign exchange (FX) swap markets increased significantly in the beginning of the Covid-19 pandemic in February 2020, indicated by larger deviations from Covered Interest Rate Parity (CIP). CIP deviations narrowed again when the Federal Reserve expanded its swap lines to support U.S. dollar liquidity globally—by enhancing and extending its swap facility with foreign central banks and introducing the new temporary Foreign and International Monetary Authorities (FIMA) repurchase agreement facility.

A Post-Keynesian Perspective on the Rise of Central Bank Independence

2013 ◽  
pp. 264-289
Author(s):  
Joerg Bibow
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Monetary Economics ◽  
Central Banks ◽  
Central Bank Independence ◽  
Time Inconsistency ◽  
Economic And Monetary Union ◽  
Wide Range ◽  
Historical Role ◽  
The One

Central bank independence (CBI) refers to the relation between the central bank and the state, the legislature and executive. In practice, central banks typically engage in a wide range of activities related to the currency sphere and the financial system. The mainstream literature popularizing CBI features a “narrow central bank” approach that concentrates on central banks’ monetary policy functions only, ignoring important interdependencies between monetary policy on the one hand, and central banks’ historical role as government’s banker (as one link to fiscal policy) and their role in safeguarding the financial system’s stability on the other. This chapter investigates the rise in CBI as an apparent success story in modern monetary economics. The worldwide rise in CBI is partly due to the advent of Economic and Monetary Union (EMU) in Europe. This chapter also discusses the time-inconsistency argument for CBI, post-Keynesian criticisms of CBI, and whether John Maynard Keynes’s model of CBI strikes a sound balance between democracy and efficiency.

Literaturbeitrag / Review Book. Über die Natur und das Wesen des Geldes – J. H. von Thünens unveröffentlichtes Manuskript zur Geldtheorie / The Nature and the Essence of Money – J. H. von Thuenen’s unpublished Manuscript on Monetary Economics

2014 ◽  
Vol 234 (1) ◽  
Author(s):  
Ludwig Nellinger
Keyword(s):  
Twentieth Century ◽  
Political Economy ◽  
Interest Rate ◽  
Production Cost ◽  
Monetary Economics ◽  
Rate Of Return ◽  
Unpublished Manuscript ◽  
John Maynard Keynes ◽  
Monetary Analysis ◽  
Late Nineteenth

SummaryThe economic works of Johann Heinrich von Thuenen include 1,000 unpublished pages of drafts and notes on the basis of which he prepared the second volume of his famous “Isolated State in Relation to Agriculture and Political Economy”. It’s bulk was not made accessible until today. The analysis of a 60 pages’ manuscript treating monetary questions and preparing his theory of capital and interest shows that the economic thoughts of Thuenen are much more far-reaching than presented in his published works. Diminishing returns of cash keeping in enterprises are the basic concept of his monetary analysis. Main results are an algebraic equation of exchange, the interaction between the monetary interest rate and the rate of return on real capital and finally a synthesis of an extended quantity theory and the production cost theory of money. “The Nature and Essence of Money” includes important elements of the development in monetary economics in the late nineteenth and the beginning twentieth century mainly influenced by contributions of Irving Fisher, Knut Wicksell and John Maynard Keynes.

On the meaning of central bank independence

1998 ◽  
Vol 1 (2) ◽  
pp. 254-267
Author(s):  
G. M. Wessels
Keyword(s):  
Economic Policy ◽  
Central Bank ◽  
Policy Making ◽  
Public Support ◽  
Central Banks ◽  
Democratic Society ◽  
Central Bank Independence ◽  
Economic Independence ◽  
Absolute Sense ◽  
Relative Independence

This article aims to clarify the meaning of the multifaceted term central bank independence. Such independence cannot be understood in an absolute sense, because the elected government in a democratic society remains the highest authority in respect of economic policy-making too. Nevertheless, central banks globally are currently endowed with strong relative independence. This may be separated into two broad categories, namely formal and informal independence. Political and economic independence are identified as elements of the former, and their various subcategories are expounded below. Informal independence is then highlighted as the more important component of independence, of which personalities, professionalism and public support are crucial. However, an ideal combination of the determinants of independence is hard to find.

scholarly journals Why Are Target Interest Rate Changes so Persistent?

2012 ◽  
Vol 4 (4) ◽  
pp. 126-162 ◽  
Author(s):  
Olivier Coibion ◽  
Yuriy Gorodnichenko
Keyword(s):  
Interest Rate ◽  
Financial Markets ◽  
Instrumental Variables ◽  
Monetary Economics ◽  
The United States ◽  
Central Banks ◽  
Time Data ◽  
Reaction Functions ◽  
Real Time Data ◽  
Competing Hypotheses

While the degree of policy inertia in central banks' reaction functions is a central ingredient in theoretical and empirical monetary economics, the source of the observed policy inertia in the United States is controversial, with tests of competing hypotheses, such as interest-smoothing and persistent-shocks, being inconclusive. This paper employs real time data; nested specifications with flexible time series structures; narratives; interest rate forecasts of the Fed, financial markets, and professional forecasters; and instrumental variables to discriminate between competing explanations of policy inertia. The evidence strongly favors the interest-smoothing explanation and thus can help resolve a key puzzle in monetary economics. (JEL C53, E43, E47, E52, E58)

scholarly journals The Effect of the Interest Rate Corridor Implementation to Central Bank Policies

2016 ◽  
Author(s):  
Mustafa Batuhan Tufaner ◽  
Kamil Uslu ◽  
İlyas Sözen
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Financial Stability ◽  
Policy Instruments ◽  
Central Banks ◽  
Price Stability ◽  
Ongoing Debate ◽  
Monetary Policies ◽  
Political Effects ◽  
The Interest Rate

Central banks fulfill missions like financing governments, contributing the improvement of the financial market and implement monetary policy. Because of these important functions, instruments of the central bank has become a subject of ongoing debate over the years. The Central Bank's monetary policies instruments are important in terms of achieving the set macroeconomics targets. In recent years to become a major focus of attention of the interest rate corridor instrument has led to examine the structure of the central banks. The interest rate corridor primarily, provides flexibility advantages through interest rate to the central banks. The opinion that the central banks which have a flexible structure are more successful on ensuring the price stability and implementing macro policies with evading the political effects became stronger. In this context, in this study to examine the contributions of a flexible central bank to price stability and financial stability. In this bulletin different policy instruments of central banks are compared and critically assessed various determinants of central bank flexibility. In addition, comparing of the legislation of major central banks and various interest rate corridor implementations are examined.

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