scholarly journals The BSP’s journey towards a progressive monetary policy framework

2021 ◽  
Vol 57 (2) ◽  
pp. 93-115
Author(s):  
Eloisa Glindro ◽  
Marites Oliva
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Policy Framework ◽  
Policy Reforms ◽  
Monetary Aggregate ◽  
Rate System ◽  
Credit Programs ◽  
Exchange Rate System ◽  
Monetary Policy Framework

This paper examines the evolution of monetary policy framework in the country. It starts the journey with the establishment of the central bank after the Second World War, when there was still no active monetary policy as the country operated on a fixed exchange rate system and supply-led credit programs. The paper describes the challenges with the implementation of monetary policy reforms in the 1980s, particularly the shift to a “managed float” exchange rate system and the adoption of monetary aggregate targeting framework in the context of deregulation and liberalization. It further discusses the development of monetary policy framework and operations, following the creation of an independent Bangko Sentral ng Pilipinas (BSP) in 1993, with the primary mandate of maintaining price stability. It provides a narrative on how the monetary aggregate targeting framework was modified to its eventual shift to an inflation targeting (IT) framework. It highlights the relative success of IT and discusses the innovative approaches undertaken by the BSP to further enhance liquidity management. Moving forward, the BSP’s monetary policy framework and operations will likely continue evolving and serving as steady anchors of macroeconomic stabilization. This will be guided by foresight, commitment to action and helpful lessons from the past, in the context of increased uncertainty.

scholarly journals A critical review of alternative monetary policies to the inflation-targeting policy

2011 ◽  
Vol 8 (4) ◽  
pp. 169-179
Author(s):  
Patrick Maumela ◽  
Nicholas M. Odhiambo
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Global Financial Crisis ◽  
Theoretical Perspective ◽  
Policy Framework ◽  
Monetary Aggregate ◽  
Monetary Policies ◽  
Exchange Rate Targeting ◽  
Policy Frameworks ◽  
Monetary Policy Framework

The purpose of this paper is to examine alternative monetary-policy frameworks from a theoretical perspective. The current global financial crisis and a debate on the appropriateness of inflation targeting as a monetary policy-framework have made it worthwhile to revisit the debate of alternative monetary-policy frameworks. As a result, different monetary-policy frameworks have been examined and reasons for and against the adoption of each policy framework were highlighted in this paper. This paper finds that there are several frameworks in which monetary policy can be conducted and none of these frameworks is perfect. Consequently, central banks over time, have experimented with various policy frameworks ranging from exchange-rate targeting to monetary-aggregate targeting. However, not all monetary-policy frameworks have been tested in practice. This paper is of the view that the adoption of a monetary-policy framework should be guided by merits and economic circumstances.

scholarly journals Exchange Rate Pass-Through, Monetary Policy, and Real Exchange Rates: Iceland and the 2008 Crisis

2022 ◽  
Author(s):  
Sebastian Edwards ◽  
Luis Cabezas
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Inflation Targeting ◽  
Real Exchange Rates ◽  
Policy Framework ◽  
Detailed Data ◽  
Price Indexes ◽  
Pass Through ◽  
Exchange Rate Pass Through ◽  
Monetary Policy Framework

AbstractWe use detailed data for Iceland to examine two often-neglected aspects of the exchange rate pass-through problem. First, we investigate whether the pass-through coefficient varies with the degree of international tradability of goods. Second, we analyze if the pass-through coefficient depends on the monetary policy framework. We consider 12 disaggregated price indexes in Iceland for 2003–2019, a period that includes Iceland’s banking and currency crisis of 2008. We find that the pass-through declined around the time Iceland reformed its flexible inflation targeting, and that the coefficients are significantly higher for tradable than for nontradables.

scholarly journals Monetary Policy in the Post Keynesian Theoretical Framework

2017 ◽  
Vol 37 (1) ◽  
pp. 45-64
Author(s):  
FÁBIO HENRIQUE BITTES TERRA ◽  
PHILIP ARESTIS
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Inflation Targeting ◽  
Debt Management ◽  
Policy Framework ◽  
Original Writings ◽  
Policy Model ◽  
Original Contribution ◽  
The Interest Rate ◽  
Monetary Policy Framework

ABSTRACT The purpose of this contribution is to develop a Post Keynesian monetary policy model, presenting its goals, tools, and channels. The original contribution this paper develops, following (Keynes’s 1936, 1945) proposals, is the use of debt management as an instrument of monetary policy, along with the interest rate and regulation. Moreover, this paper draws its monetary policy model by broadly and strongly relying on Keynes’s original writings. A monetary policy model erected upon this basis relates itself directly to the Post Keynesian efforts to offer a monetary policy framework substantially different from the Inflation Targeting Regime of the New Macroeconomic Consensus.

scholarly journals On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View

2013 ◽  
Vol 18 (2) ◽  
pp. 65-119
Author(s):  
Adnan Haider ◽  
Asad Jan ◽  
Kalim Hyder
Keyword(s):  
Monetary Policy ◽  
Money Demand ◽  
Demand Function ◽  
Policy Framework ◽  
Monetary Aggregate ◽  
Money Demand Function ◽  
Financial Innovations ◽  
The Stability ◽  
Nominal Anchor ◽  
Monetary Policy Framework

This study attempts to identify a stable money demand function for Pakistan’s economy, where the monetary aggregate is considered the nominal anchor. With evolving financial innovations and regulations, the stability of money demand has been the focus of numerous debates. Where earlier studies have provided conflicting explanations due to inadequate specifications and imprecise estimations, we find that money demand in Pakistan is stable, if specified properly. For developing countries such as Pakistan, it is important to target monetary aggregates or respond to deviations from the desirable path if monetary policy is to be effectively implemented and communicated; this should remain, if not a primary, then an auxiliary target in the monetary policy framework.

The czech embarrassment of inflation targeting in transition

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Martin Mandel ◽  
Vladimír Kosmata
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Policy Framework ◽  
The Third ◽  
Interest Rate Volatility ◽  
Monetary Targeting ◽  
Theoretical Assumptions ◽  
National Bank ◽  
Monetary Policy Framework

In 1998 the Czech National Bank (CNB) changed its monetary policy framework and started to target inflation. The article discusses main theoretical aspects of inflation targeting and some practical problems with implementation of inflation targeting. The main characteristics of the inflation and monetary targeting are described in the first and second part. The third part deals with practical issues connected with inflation targeting (number of countries using inflation targeting, quality of inflation predictions, inflation and interest rate volatility). In the final part the CNB monetary policy function is estimated and the results are compared with the theoretical assumptions of the inflation targeting.

In search for a new anchor: inflation targeting in the czech republic

2000 ◽  
Vol 9 (3) ◽  
Author(s):  
Jiří Jonáš
Keyword(s):  
Monetary Policy ◽  
Czech Republic ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Policy Framework ◽  
The Czech Republic ◽  
Fourth Part ◽  
National Bank ◽  
New Framework ◽  
Monetary Policy Framework

In December 1997 the Czech National Bank introduced a new framework for the conduct of monetary policy, inflation targeting. This article examines the preliminary experience with inflation targeting in the Czech Republic. In the second part, we discuss the reasons that have led the Czech National Bank to introduce this monetary policy framework. Third part describes principal operational features of inflation targeting in the Czech Republic, and discusses the specifics of inflation targeting under the conditions of an economy in transition. Fourth part reviews the conduct of monetary policy under the new regime, focusing particularly on how the new policy framework has affected central bank's decisions about interest rates. Fifth part discusses some reasons why implementation of inflation targeting during the first two years was difficult, and sixth part evaluates the experience with inflation targeting and provides some suggestions for improving the framework.

Implementation Of Inflation Targeting And Budget Deficit Performance In Emerging Countries: A Treatment Effect Evaluation

2014 ◽  
Vol 30 (4) ◽  
pp. 1077 ◽  
Author(s):  
Mohamed Kadria ◽  
Mohamed Safouane Ben Aissa
Keyword(s):  
Monetary Policy ◽  
Treatment Effect ◽  
Budget Deficit ◽  
Inflation Targeting ◽  
Emerging Countries ◽  
Policy Framework ◽  
It Adoption ◽  
Effect Evaluation ◽  
Fiscal Discipline ◽  
Monetary Policy Framework

<p>In this paper, we tried to examine whether the implementation of inflation targeting (IT) monetary policy and its discipline character allows reducing the budget deficit in emerging countries. To do this, we used the propensity score matching methodology to evaluate the treatment effect of IT on fiscal discipline, in terms of budget deficit performance, in emerging countries has adopted this monetary policy framework. Our empirical analysis, conducted on a sample of 41 economies (20 IT and 21 non-IT economies) for the period from 1990 to 2010, shows that on average IT adoption has had a considerable and significant effect in reducing the budget deficit. Our results are confirmed by the robustness tests and corroborate the literature of disciplining effects of IT regime on the fiscal discipline.</p>

An Evaluation of Monetary Targeting Regimes

2000 ◽  
Vol 174 ◽  
pp. 105-113 ◽  
Author(s):  
Ray Barrell ◽  
Karen Dury
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Price Level ◽  
Policy Framework ◽  
Policy Regime ◽  
Feedback Mechanisms ◽  
Policy Regimes ◽  
Monetary Targeting ◽  
Over Time ◽  
Monetary Policy Framework

The policy regime in Europe has put the economy on ‘auto-pilot’. We investigate different designs for the required feedback mechanisms. The uncertainty facing an economy depends on the pattern of shocks it faces, the response of the private sector to those shocks and also the policy reactions of the authorities. Two ‘ideal type’ policy regimes are investigated, and inflation targeting is compared to nominal aggregate targeting. In general it is suggested that targeting a nominal aggregate reduces the variability of the price level, and stabilises the price level more quickly over time. Inflation outcomes are also less variable for the Euro Area, and they are less asymmetric when a nominal aggregate is targeted. The new European fiscal framework requires that countries set deficit targets close to balance. We show that there is plenty of space for automatic stabilisers to work, but the room available depends in part on the monetary policy framework chosen.

scholarly journals South African price changes and inflation since 1974: a note on the testing of inflation accuracy

2011 ◽  
Vol 11 (2) ◽  
pp. 229-246
Author(s):  
Jannie Rossouw ◽  
Vishnu Padayachee
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
South African ◽  
Inflation Targeting ◽  
Policy Framework ◽  
Inflation Target ◽  
Price Levels ◽  
Price Movements ◽  
Actual Price ◽  
Monetary Policy Framework

As inflation credibility in South Africa records low readings when measured in terms of inflation credibility barometers, this note aims at assessing whether actual price movements provide any grounds for low inflation credibility.  It compares the price movements of similar items with the rate of inflation over a period of 32 years, i.e. from 1974 to 2006, and discusses the use of an inflation accuracy indicator to compare estimated price levels adjusted by the rate of inflation and actual price levels.  Over the period of comparison no systematic over- or underreporting of changes in prices in terms of the rate of inflation could be detected and the analysis suggests that little or no basis can be found to justify low inflation credibility.  Inflation credibility is more likely than not influenced by the most recent purchasing experiences of consumers.  Doubts concerning the accuracy of inflation figures could nevertheless result in the general public concluding that monetary policy aiming at the achievement of an inflation target brings only the pain of high interest rates without the tangible benefits of lower inflation, thereby jeopardising the usefulness of an inflation-targeting monetary policy framework.

scholarly journals "Does Inflation Targeting Framework Make a Significant Difference in Lowering Price Level?” What is Its Implication to Indonesia’s Inflation Rate?

2015 ◽  
Vol 61 (2) ◽  
pp. 131
Author(s):  
Faisal Rachman
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Price Level ◽  
Structural Break ◽  
Policy Framework ◽  
Difference In Difference ◽  
Public Expectation ◽  
Significant Difference ◽  
Monetary Policy Framework

AbstractIn the last two decades many countries have been starting to employ Inflation Targeting Framework (ITF) as their main monetary policy framework. This is done to achieve an objective of anchoring public expectation on inflation which in the end will steer the price level movement towards ITF’s ultimate target of relatively low and stable inflation rate. By conducting Difference-in-Difference method on panel data consisting of five countries implementing ITF since 2001 and twenty-one selected non-ITF countries for period 1990-2010, it is statistically proved that ITF adoption has a significant effect on inflation. In case of Indonesia, through Structural Break approach, the implementation of ITF since 2005 is also proved able to lower and stabilize inflation rate.Abstrak Dalam dua dekade terakhir ini banyak negara yang telah mulai menggunakan Inflation Targeting Framework (ITF) sebagai kerangka utama kebijakan moneter mereka. Hal ini dilakukan guna mencapai tujuan pengendalian ekspektasi publik yang pada akhirnya akan mengendalikan pergerakan tingkat harga relatif rendah and stabil. Dengan menggunakan metode Difference-in-Difference pada data panel, yang terdiri dari lima negara yang telah mengimplementasikan ITF sejak tahun 2001 dan dua puluh satu negara bukan pengguna ITF, untuk periode 1990-2010, disimpulkan bahwa ITF memiliki dampak signifikan pada tingkat inflasi. Untuk kasus Indonesia yang telah mengimplementasikan ITF sejak tahun 2005, melalui metode Structural Break disimpulkan hasil yang sama, yaitu tingkatan harga yang rendah dan stabil.

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