Monetary policy when the objectives of central bankers are imperfectly observable

2021 ◽  
Author(s):  
Francesco Salsano
Keyword(s):  
Monetary Policy ◽  
Central Bankers

scholarly journals South Africa’s economic response to monetary policy uncertainty

2017 ◽  
Vol 44 (2) ◽  
pp. 282-293 ◽  
Author(s):  
Mehmet Balcilar ◽  
Rangan Gupta ◽  
Charl Jooste
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Stochastic Volatility ◽  
Stochastic Volatility Model ◽  
Economic Consequences ◽  
Policy Uncertainty ◽  
Dsge Model ◽  
Content Type ◽  
Volatility Model ◽  
Central Bankers

Purpose The purpose of this paper is to study the evolution of monetary policy uncertainty and its impact on the South African economy. Design/methodology/approach The authors use a sign restricted SVAR with an endogenous feedback of stochastic volatility to evaluate the sign and size of uncertainty shocks. The authors use a nonlinear DSGE model to gain deeper insights about the transmission mechanism of monetary policy uncertainty. Findings The authors show that monetary policy volatility is high and constant. Both inflation and interest rates decline in response to uncertainty. Output rebounds quickly after a contemporaneous decrease. The DSGE model shows that the size of the uncertainty shock matters – high uncertainty can lead to a severe contraction in output, inflation and interest rates. Research limitations/implications The authors model only a few variables in the SVAR – thus missing perhaps other possible channels of shock transmission. Practical implications There is a lesson for monetary policy: monetary policy uncertainty, in isolation from general macroeconomic uncertainty, often creates unintended adverse consequences and can perpetuate a weak economic environment. The tasks of central bankers are incredibly difficult. Their models project output and inflation with relatively large uncertainty based on many shocks emanating from various sources. It matters how central bankers react to these expectations and how they communicate the underlying risks associated with setting interest rates. Originality/value This is the first study that looks into monetary policy uncertainty into South Africa using a stochastic volatility model and a nonlinear DSGE model. The results should be very useful for the Central Bank as it highlights how uncertainty, that they create, can have adverse economic consequences.

Putting the Program into Action, 1920–1928

2016 ◽  
Author(s):  
Simon James Bytheway ◽  
Mark Metzler
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Ad Hoc ◽  
Central Banks ◽  
Financial Globalization ◽  
International Network ◽  
Bank Of England ◽  
International Monetary Policy ◽  
Central Bankers

This chapter details how Montagu Norman of the Bank of England, in partnership with Benjamin Strong of the FRBNY, turned ad hoc wartime cooperation into a formal agenda. The paired ideas that national central banks should be autonomous, and that they should cooperate with each other, were first spelled out in a private “manifesto” that Norman circulated among fellow central bankers in 1921. Central bank cooperation was internationally recognized as a principle at the 1922 Genoa Conference, and it was also put into practice. Cooperation between central banks began primarily as informational cooperation, which includes not only the sharing of information but also the sharing and propagation of worldviews. An international network of central banks thus developed out of the war, as did the world's first truly coordinated system of international monetary policy. In these and other ways, financial globalization surged to a new level in the 1920s.

The Over-Burdened Central Bank and the Shift Away from Autonomy

2017 ◽  
Author(s):  
Pierre L. Siklos
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Central Banks ◽  
Central Banking ◽  
Forward Guidance ◽  
Self Assessments ◽  
Crisis Conditions ◽  
Central Bankers ◽  
Influence Behavior

Many central banks took on additional responsibilities. Inadequate self-assessments remain unfinished almost a decade after the crisis erupted. Government-central bank relationships need to be conditioned on whether times are normal versus crisis conditions. Transparency confronts ambiguity when central banks must communicate the outlook and the conditionality of their decisions. Forward guidance was taken too far and ended up being futile. Central bankers simply exhausted their ability to influence behavior through mere words or ambiguous statements. This is a self-inflicted wound for institutions that are seen as overburdened. These forces leave central banking more vulnerable than is commonly acknowledged. Squaring the conventional objectives of monetary policy with the unclear aims of financial stability is difficult. Adequate limitations on the authority of central banks have yet to be thoroughly debated. We are nowhere near resolving the inherent tensions between old and new sets of central bank objectives.

scholarly journals The Impact of Unconventional Monetary Policy on Gendered Wealth Inequality

2019 ◽  
Vol 31 (2) ◽  
pp. 175-186 ◽  
Author(s):  
Brigitte Young
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
Household Finance ◽  
Wealth Inequality ◽  
Unconventional Monetary Policy ◽  
Distributional Effects ◽  
Monetary Policies ◽  
The Rich ◽  
The Impact ◽  
Central Bankers

Unconventional monetary policy was implemented as a result of the financial crisis and resulted in rising asset prices in the stock markets. While the increase in asset prices is not exclusively triggered by unconventional monetary policy, central bankers accept that unconventional monetary policy has resulted in distributional effects on wealth, and that these are not negligible. What is missing are studies analyzing whether these non-standard monetary policies have different distributional effects on women and men. The intent of the paper is to interrogate whether unconventional monetary policy of central banks has a gender bias that operates in favor of men as gender and against women as gender. Relying on insights from feminist economics, the paper uses the results of the ECB Household Finance and Consumption Survey (HFCS) of 62,000 household across 15 euro-area countries. While the results are tentative, they show an asymmetric distributional gendered impact. Since the rich own more assets than the poor, and since monetary easing works in part by raising asset prices, these unconventional policies may unintentionally benefit the wealthier quintile (on average more male) at the expense of the poorer strata of society (on average more female).

scholarly journals Review of the Bank of Russia – NES Workshop ‘Main Challenges in Banking: Risks, Liquidity, Pricing, and Digital Currencies’

2021 ◽  
Vol 80 (4) ◽  
pp. 124-136
Author(s):  
Ivan Khotulev ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Systemic Risk ◽  
Credit Spreads ◽  
Information Flows ◽  
Real Economy ◽  
The Real ◽  
Market Participants ◽  
Central Bankers ◽  
Liquidity Pricing

In October 2021, the Bank of Russia and the New Economic School (NES) hosted a joint international online workshop titled ‘Main Challenges in Banking: Risks, Liquidity, Pricing, and Digital Currencies’. Five papers were presented. They addressed various issues in banking which are currently of paramount importance to central bankers, market participants, and academics: the connections between systemic risk and the real economy, the digitalisation of finance and information asymmetries, credit spreads and monetary policy, the improvement of information flows and outcomes in credit markets, the introduction of central bank digital currencies, and bank intermediation.

Asymmetric incentives and the new politics of monetary policy

2020 ◽  
Author(s):  
Gene Park ◽  
Gabrielle Cheung ◽  
Saori N Katada
Keyword(s):  
Monetary Policy ◽  
Inflation Rate ◽  
Policy Implications ◽  
Quantitative Easing ◽  
Monetary Policies ◽  
New Politics ◽  
Important Policy ◽  
Central Bankers

Abstract This article develops and tests a theory of asymmetric incentives to explain why politicians might be less motivated to confront deflation than inflation. Leveraging Japan as a least-likely crucial case, we analyze the conditions that lead legislators to take advantage of their power to summon central bankers for questioning. We find that even moderate inflation makes it more likely that legislators will summon central bankers compared to periods when the inflation rate is near zero. By contrast, deflation has either no effect or reduces the likelihood of summonses. We also find some evidence that unconventional monetary policies to combat deflation, specifically quantitative easing, are likely to invite greater legislative scrutiny. These findings have important policy implications. While deflation is widely viewed as pernicious and more difficult to exit than inflation, there are weaker incentives for politicians to address it.

Deflation, Monetary Policy Responses, and the Boj

2018 ◽  
pp. 9-42
Author(s):  
Gene Park ◽  
Saori N. Katada ◽  
Giacomo Chiozza ◽  
Yoshiko Kojo
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Economic Consequences ◽  
Supply Side ◽  
Monetary Policies ◽  
Goods And Services ◽  
Policy Responses ◽  
Forward Guidance ◽  
Negative Interest Rates ◽  
Central Bankers

This chapter discusses deflation, monetary policy responses against deflation, and the Bank of Japan's (BOJ) reluctance to try bolder measures to reflate the economy. Deflation, when the price of goods and services declines, is attributable to a number of causes. It can result from supply-side improvements such as enhanced productivity and thus can coincide with economic growth. However, deflation can also occur through demand-side shocks. These shocks can be the result of policy mistakes. Under such circumstances, deflation can have potentially damaging economic consequences. Some of the monetary policy responses against deflation include forward guidance, quantitative easing (QE), interest rate targeting, negative interest rates, and helicopter money. There are several possible explanations for the BOJ Policy Board's resistance to adopting unconventional monetary policies. It could be that central bankers at the BOJ did not believe that they would be effective. Another explanation is that the BOJ was more hesitant to use QE because of the country's fiscal position.

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