scholarly journals Central banks and inflation: where do we stand and how did we get here?

2021 ◽  
Vol 18 (3) ◽  
pp. 310-330
Author(s):  
Karl Whelan
Keyword(s):  
Central Bank ◽  
Phillips Curve ◽  
Central Banks ◽  
Policy Options ◽  
Current Policy ◽  
Monetary Policies ◽  
Monetary Aggregates ◽  
Milton Friedman ◽  
Inflation Rates ◽  
The 1960S

The inability of central banks to attain their target inflation rates in recent years has raised questions about the extent to which central banks can control the inflation process. This paper discusses the evolution of thought and evidence since the 1960s on the determinants of inflation and the role that should be played by central banks. The paper highlights the roles played by two streams of thought associated with Milton Friedman: monetarist theories predicting a key role for monetary aggregates in determining inflation and the rise in popularity of the expectations-augmented Phillips curve. The author discusses the influence of the latter in determining the modern consensus on central-bank institutions and the relative roles for fiscal and monetary policies. The paper concludes with a discussion of macroeconomic developments since 2010 and current policy options to stimulate the economy and restore inflation to its target levels, including the merits of ‘helicopter money’.

Analysis of the Analytical Balance Sheet of Central Bank of Republic of Turkey During 2000 - 2009 Period in Terms of Crises

2014 ◽  
pp. 1284-1302
Author(s):  
Yıldız Özkök
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Balance Sheet ◽  
Central Banks ◽  
Money Market ◽  
Price Stability ◽  
Primary Target ◽  
Monetary Aggregates ◽  
Analytical Balance ◽  
Republic Of Turkey

Today, Central Banks' primary target is to maintain the price stability. In that context, through their monetary policy, they intervene in the money market with different tools. The Analytical Balance Sheet was created upon summing up and offsetting Balance Sheet of the Central Bank of Republic of Turkey (CBRT) in order to represent specific monetary aggregates. By means of that, CBRT aims to make the balance sheet more understandable and simple. In this chapter, firstly the sub items of the Analytical Balance Sheet are explained; secondly, the economic crises of Turkey during 2000-2009 is mentioned; finally, effects of these crises on the CBRT's Analytical Balance Sheet, changes in monetary aggregates which are Currency Issued, Reserve Money, Monetary Base, and Central Bank's Money, and in this context structure of the monetary policy of the CBRT in this period is analyzed.

scholarly journals The Role Of Turkish Central Bank During And After The 2008-Financial Crises

2011 ◽  
Vol 10 (12) ◽  
pp. 93
Author(s):  
Ayhan Guney
Keyword(s):  
Central Bank ◽  
Financial Crises ◽  
Central Banks ◽  
Fiscal Policies ◽  
Monetary Policies ◽  
The World ◽  
One Year ◽  
Short Time ◽  
Time Spread

The Global Financial Crises occurred at the end of 2008, and in very short time, spread to all sectors of economy.All countries were badly hit by the crises and the World economies shrank almost $50 trillion, the equivalent of one year of world GDP.During the process, especially the banking sectors of the world economies was smashed, and many banks and financial institutions bankrupted and some others liquidated such as Lehman Brothers. All countries took the drastic fiscal and monetary measures to overcome the global crises. So, this paper focuses on the functions of central banks asking that what the role of central banks to cope with the global crises was, and thus omits the side of fiscal policies implemented by different countries.It especially discusses the role of Turkish Central Bank and its monetary policies during and after the 2008-Global Financial Crises. What was the achievement of the measures taken and the monetary policies implemented by Turkish Central Bank during and after the financial crises?

Testing the Validity of Taylor's Rule on Developing Countries for Effective Financial Marketing

2020 ◽  
pp. 450-470
Author(s):  
Ali Doğdu ◽  
Gökçe Kurucu ◽  
İhsan Erdem Kayral
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Response Function ◽  
Unit Root ◽  
Policy Response ◽  
Short Term ◽  
Monetary Policies ◽  
Inflation Rates ◽  
Augmented Dickey Fuller ◽  
Causality Relationship

This chapter examines whether the central bank policy behaviors of E-7 countries are valid by using a Taylor type monetary policy response function. In this context, the policy response function of banks is analyzed by using monthly data for the 2008-2018 period. Then, unit root tests of ADF (Augmented Dickey Fuller), PP (Philips Perron), IPS (Im Peseran Shin) and LLC (Levin Lin Chu) were performed and analyzed by using Dumitrescu-Hurlin methodology. As a result of the analyses conducted using inflationary data, it was observed that short-term interest rates of the central bank affect price stability by causing inflation, but inflation rates did not cause an increase or decrease in short-term interest rates. According to the findings, although inflation does not cause interest rates to change in E7 countries, a causality relationship has emerged from interest rates to inflation rates. These results indicate that the monetary policies implemented in these countries are not carried out in accordance with the Taylor rule.

Analysis of the Analytical Balance Sheet of Central Bank of Republic of Turkey During 2000 - 2009 Period in terms of Crises

2013 ◽  
pp. 110-127
Author(s):  
Yildiz Özkök
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Balance Sheet ◽  
Central Banks ◽  
Money Market ◽  
Price Stability ◽  
Primary Target ◽  
Monetary Aggregates ◽  
Analytical Balance ◽  
Republic Of Turkey

Today, Central Banks’ primary target is to maintain the price stability. In that context, through their monetary policy, they intervene in the money market with different tools. The Analytical Balance Sheet was created upon summing up and offsetting Balance Sheet of the Central Bank of Republic of Turkey (CBRT) in order to represent specific monetary aggregates. By means of that, CBRT aims to make the balance sheet more understandable and simple. In this chapter, firstly the sub items of the Analytical Balance Sheet are explained; secondly, the economic crises of Turkey during 2000-2009 is mentioned; finally, effects of these crises on the CBRT’s Analytical Balance Sheet, changes in monetary aggregates which are Currency Issued, Reserve Money, Monetary Base, and Central Bank’s Money, and in this context structure of the monetary policy of the CBRT in this period is analyzed.

Inflation expectations: An overview of modern approaches

2019 ◽  
pp. 54-80 ◽  
Author(s):  
N. A. Ranneva
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Rational Expectations ◽  
Phillips Curve ◽  
Time Estimation ◽  
Central Banks ◽  
Inflation Expectations ◽  
Expectation Formation ◽  
Theoretical Approaches

Modern economic theory considers expectations as a key determinant of actual inflation. How agents form those expectations therefore plays a central role in macroeconomic dynamics and policy-making. The understanding of the expectation formation process and the real-time estimation of expectations are especially important for central banks because they need to be sure that longer-term inflation expectations are anchored at the target of inflation, set by the central bank. When expectations are anchored — it is a clear sign that the monetary policy is effective and that markets trust the central bank. However, it is not easy to assess the expected inflation: it is not observable and cannot be directly measured. Central banks can only use the indirect estimates of this variable. For many years the main theoretical framework for modeling and analysis of inflation expectations was Phillips curve with rational expectations which substituted the adaptive expectations. Today many alternative models of expectation formation are available. The article provides a brief overview of the evolution of theoretical approaches to inflation expectation formation and their impact on the monetary policy. Besides, using the experience of the U.S., the article addresses two main ways to gauge inflation expectations empirically — survey-based measures (for different groups of respondents) and measures based on the data from American financial markets. Shortcomings and merits of both approaches are discussed, as well as the importance of highly developed financial markets, which can become the source of more precise information on inflation expectations.

scholarly journals Developments in Monetary Policies before and after the Recent Financial Crisis and the Change in the Role of Central Banks

2014 ◽  
Author(s):  
Zekayi Kaya ◽  
Erkan Tokucu
Keyword(s):  
Financial Crisis ◽  
Central Bank ◽  
Financial Stability ◽  
Policy Instruments ◽  
Central Banks ◽  
Price Stability ◽  
Lender Of Last Resort ◽  
Monetary Policies ◽  
Recent Financial Crisis

During the historical process, application of the monetary policies and the roles of the central banks have changed within the framework of the developments in the world economy, problems encountered and the economic policies as a solution to these problems. The financial crises after 1990 and the recent financial crisis as the biggest experienced one after 1930s, caused an increase in the importance of the task of providing financial stability besides price stability and in this context in the function of “lender of last resort” of the central bank. The crisis required using new policy instruments in addition to interest rate instrument which was not sufficient enough in providing financial stability and the roles of the central banks in providing financial stability changed. In this study, applications of monetary policies and the changing role of the central banks will be examined. Within this framework, traditional and non-traditional instruments will be explained and the problems that can be confronted by a central bank when providing price stability besides financial stability will be remarked.

scholarly journals Central bank transparency and exchange rate volatility effects on inflation-output volatility

2016 ◽  
Vol 5 (4) ◽  
pp. 125
Author(s):  
Stephanos Papadamou ◽  
Moïse Sidiropoulos ◽  
Eleftherios Spyromitros
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Exchange Rate Volatility ◽  
Central Banks ◽  
Output Volatility ◽  
Monetary Policies ◽  
Inflation Volatility ◽  
Clear Cut ◽  
Central Bank Transparency ◽  
The Exchange Rate

While the tendency towards more transparent central banks is irrefutable, the effects of more transparent monetary policies mainly on output volatility are not clear-cut. In this note, we estimate our panel for 36 countries over the period 1998-2005 which is characterized by significant changes in central bank transparency levels, using the Prais-Winsten method with PCSEs and controlling for the exchange rate volatility that positively affects inflation and output. We provide evidence in favor of transparency and exchange rate stability policies since they reduce both output and inflation volatility.

Understanding the Role of Central Banks in the Financial System

2020 ◽  
pp. 40-64
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Critical Role ◽  
Balance Sheet ◽  
Financial System ◽  
Central Banks ◽  
Central Banking ◽  
Historical Background ◽  
Monetary Policies

The main responsibility of the central banks is to implement monetary policies. In this framework, they define interest rates and the amount of the money in the financial system. Hence, it can be said that central banks have the critical role in the development of the financial system. Because of this situation, it is obvious that central banks should satisfy some requirements, such as independence, in order to contribute to the effectiveness of the financial systems. Parallel to this aspect, this chapter aims to understand the role of the central banks in the financial system. In this context, the purpose and historical background of the central banking are explained. In addition to this situation, the subject of the central bank independence is identified as well. In the final aspect, important accounts in the analytical balance sheet of the central bank are defined.

scholarly journals Central Bank Independence and economic crises: how both the fed and ECB managed to rely on unconventional monetary policies

2018 ◽  
Vol 12 (1) ◽  
pp. 335-348
Author(s):  
Mădălina Doroftei ◽  
Alexandru Pătruți
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Practical Importance ◽  
Central Banks ◽  
Central Bank Independence ◽  
Point Of View ◽  
Economic Downturn ◽  
Economic Crises ◽  
Monetary Policies ◽  
Long Run

Abstract The Central bank independence was viewed in the last decades as an essential prerequisite for ensuring good monetary policies. However, the global crisis of 2009 has shown that this concept was of little practical importance. The European Central Bank, which was built as one of the most independent central banks in the world, and the Federal Reserve System, a not so independent central bank from the point of view of legal independence, reacted in almost the same manner to the looming crises. Both of them used unconventional monetary policies, for which there was little theoretical support, to safeguard their economies. Quantitative easing, forward guidance and negative interest rate are now considered common instruments in the monetary authority’s arsenal. Moreover, central banks now have an extended goal, i.e. to provide financial stability. This means that they are expected to take action to prevent future economic crises by using monetary policy as a counter-cycle instrument. Given this important modification regarding the expected actions which must come from the monetary authorities, we argue that central bank independence becomes irrelevant in times of economic downturn, when they will use whatever means necessary to ensure financial stability. Political short run need will surpass long run stability as a priority for monetary decision makers.

scholarly journals Central Banks Caught Between Market Liquidity and Fiscal Disciplining: A Money View Perspective on Collateral Policy

2021 ◽  
Author(s):  
Jakob Vestergaard ◽  
◽  
Daniela Gabor ◽  
Keyword(s):  
Central Bank ◽  
Risk Taking ◽  
Sovereign Debt ◽  
Debt Crisis ◽  
Central Banks ◽  
Crisis Response ◽  
Market Liquidity ◽  
Monetary Policies ◽  
European Central ◽  
Point Of Departure

Despite much attention to unconventional monetary policies after the financial crisis, the collateral policies of central banks are rarely discussed. And when they are, the haircuts applied to assets pledged to access central bank liquidity tend not to be analyzed. An exception to these trends is the recent work by Nyborg (2017), who argues that the collateral policies adopted by the European Central Bank (ECB) aggravated the sovereign debt crisis and put the survival of the euro at risk. Taking our point of departure in the money view literature (Mehrling 2011), we argue however that Nyborg’s critique of the ECB’s crisis response is misguided and that his proposal to deepen and reinforce the ECBs role in the fiscal disciplining of member states would be procyclical and destabilizing. Through our analysis of Nyborg’s work and the ECBs crisis response, we identify core principles for countercyclical collateral policies suitable for market-based financial systems.

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