Monetary Policy, Quantitative Forward Guidance, and Long-Term Interest Rates: Evidence from Three Central Banks

2008 ◽  
Author(s):  
Magnus Andersson ◽  
Boris Hofmann
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Forward Guidance

Central Bank Planning

2018 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Practical Reasoning ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers until recently drew a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralized knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy further into the future, these unconventional policies nevertheless mark a structural break—the return of hydraulic macroeconomic state agency, refashioned for a financialized economy. This chapter analyses the theoretical and practical reasoning behind this shift in the governability paradigm and examines the epistemic and reputational costs of modern central bank planning and the non-market setting of long-term bond prices.

scholarly journals Central bank planning: Unconventional monetary policy and the price of bending the yield curve

2017 ◽  
Author(s):  
Benjamin Braun
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Yield Curve ◽  
Structural Break ◽  
Central Banks ◽  
State Agency ◽  
Policy Interventions ◽  
Forward Guidance ◽  
Central Bankers

Central banks have increasingly used communication to guide market actors’ expectations of future rates of interest, inflation, and growth. However, aware of the pitfalls of (financial) central planning, central bankers used to draw a line by restricting their monetary policy interventions to short-term interest rates. Longer-term rates, they argued, reflected decentralised knowledge and should be determined by market forces. By embracing forward guidance and quantitative easing (QE) to target long-term rates, central banks have crossed that line. While consistent with the post-1980s expansion of the temporal reach of monetary policy into the future, these unconventional policies nevertheless mark a structural break – the return of hydraulic macroeconomic state agency, refashioned for a financialised economy.

Central Bank Communication

2019 ◽  
pp. 230-262
Author(s):  
Jakob de Haan ◽  
Jan-Egbert Sturm
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Central Banks ◽  
Inflation Expectations ◽  
Short Term ◽  
The Public ◽  
Central Bank Communication ◽  
Forward Guidance ◽  
The World ◽  
Future Direction

Many central banks in the world nowadays regard their external communication as an important tool to achieve their goals. This chapter provides an overview of the different ways in which central banks inform the public about the future direction of monetary policy and how successful they have been in recent years. Forward guidance is either part of a monetary policy strategy in which an explicit inflation target is targeted or is part of a strategy that attempts to circumvent the effective lower bound regarding the nominal interest rate. In both cases, forward guidance attempts to influence longer-term interest rates and inflation expectations through the expected future short-term interest rates.

Digital currencies enhance 21st century monetary tools

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Central Banks ◽  
Content Type ◽  
The Public ◽  
Digital Currency ◽  
Advanced Economies ◽  
Severe Recession

Subject From fiat to digital currencies. Significance With the use of cash dwindling in the advanced economies, central banks are losing their only direct monetary connection to the public. At the same time, monetary policy could face meaningful limits in stimulating growth if a severe recession strikes the advanced economies as policy interest rates are already close to zero. Impacts Tech advances, combined with downgraded long-term growth, price and interest rate forecasts, draw attention to new monetary policy tools. Central bank digital currencies would have a central custodian to coordinate them, overcoming a key ‘stateless’ cryptocurrency weakness. A digital currency gives central banks a way to reflate the economy and support certain households, but there may be political obstacles.

scholarly journals Powrót do przedkryzysowej polityki pieniężnej a stabilność systemu finansowego

2017 ◽  
pp. 190-200
Author(s):  
Ilona Skibińska-Fabrowska
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Balance Sheet ◽  
Policy Instruments ◽  
Central Banks ◽  
Financial Assets ◽  
Negative Effects ◽  
The Stability

Faced with the financial crisis in 2008, the central banks used conventional monetary policy instruments. However, the problem of zero lower bond forced them to use unconventional monetary policy instruments - quantitative easing carried out as part of the so-called central bank balance sheet politics and relying on the buying by the central bank of di&erent kinds of financial assets - resulting in stabilization of the situation on financial markets in conditions of low long-term interest rates. Balance sheet totals of the central banks rose repeatedly. Their structure also changed. At present possible effects for the stability of the financial system of the return to the pre-crisis monetary policy are the topic of debate. The exit strategy is giving rise to a significant risks and the coordination of economic policy and the transparency of action taken by monetary authorities can only minimize possible negative effects

scholarly journals Evaluating the Unconventional Monetary Policy of the Bank of Japan: A DSGE Approach

2021 ◽  
Vol 14 (6) ◽  
pp. 253
Author(s):  
Rui Wang
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Simulation Analysis ◽  
Central Banks ◽  
Japanese Economy ◽  
Lower Sensitivity ◽  
Unconventional Monetary Policy ◽  
Bank Of Japan

When the nominal interest rate reaches the zero lower bound (ZLB), a conventional monetary policy, namely, the adjustment of short-term interest rate, may become impractical and ineffective for central banks. Therefore, quantitative easing (QE) is one of the few available policy options of central banks for stimulating the economy and dealing with deflationary pressure. Since February 1999, the Bank of Japan (BoJ) has conducted several unconventional monetary policy programs. Considering the scarce research in this field from a structural macroeconomic model approach, a medium-scale New Keynesian DSGE model with government bonds of different maturities was developed to check the portfolio rebalancing channel of quantitative qualitative easing (QQE) conducted by the BoJ from April 2013 on the basis of the assumption of imperfect asset substitutability. The model was calibrated on the basis of the structure of the Japanese economy in April 2013. The main conclusion is that the BoJ’s asset purchase has a real effect on pushing output and inflation higher, and long-term interest rates lower. Sensitivity simulation analysis shows that, given the same size of asset purchase, the persistence of asset purchase determines the peak effect in the short run. A long-lasting asset purchase can push up inflation higher, and long-term interest rates lower for a relatively longer period, but the long-run effect on output and investment does not have much difference. The policy implication for BoJ is just to announce a long-lasting QE program and make it credible to the market.

scholarly journals Forward guidance jako instrument polityki pieniężnej – możliwości wykorzystania

2015 ◽  
Vol 1 (3) ◽  
pp. 51-60
Author(s):  
Ilona  Skibińska-Fabrowska
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Central Banks ◽  
Communication Policy ◽  
Market Participants ◽  
Forward Guidance ◽  
Monetary Authorities ◽  
Effective Instrument ◽  
Targeting Strategy

Communication policy of central banks in the framework of direct inflation targeting strategy and related strategies is important. Its tools include forward guidance as a method of influencing the expectations of market participants. Although forward guid a method of influencing the expectations of market participants. Although forward guidance was used before the outbreak of the financial crisis, it was not popular. After 2008, under conditions of zero interest rate, monetary authorities have begun to use the forward guidance as an unconventional and effective instrument allowing monetary policy to have impact on market interest rates. However, the risks when using forward guidance include the possibility of misinterpretation of the conditional nature of the declaration of the monetary authorities. 

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