Independence, Conservatism and Beyond: Central Bank Design and Central Banker Preferences in Monetary Policy Economics (1981-2019)

2020 ◽  
Author(s):  
Donato Masciandaro
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Central Banker

Public investment, inflation persistence and central bank independence

2017 ◽  
Vol 44 (6) ◽  
pp. 976-986 ◽  
Author(s):  
Stephanos Papadamou ◽  
Eleftherios Spyromitros ◽  
Panagiotis Tsintzos
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Central Bank ◽  
Public Investment ◽  
Central Bank Independence ◽  
Inflation Persistence ◽  
Content Type ◽  
Central Banker ◽  
Long Run ◽  
The Uk

Purpose The purpose of this paper is to investigate, both theoretically and empirically, the institutional setting of monetary policy making that mitigates the effects of productive public investment on inflation persistence. Design/methodology/approach In the theoretical approach, the authors consider a simple monetary game model à la Barro-Gordon introducing, apart from stochastic output shocks, indexed wage contracts and public investment effects. Then, the authors empirically produce inflation persistence and public investment persistence by estimating a first-order autoregressive model in a fixed rolling window of 36 months for the UK and also use a dummy in order to incorporate the regime switch in monetary policy since 1997, giving a clear increase in the level of central bank independence. Findings The theoretical framework suggests that an independent central banker could better manage inflation expectations and therefore inflation persistence despite the occurrence of persistent public investment shocks. From the perspective of fiscal policy, the appointment of a conservative and independent central banker could absorb adverse effects on inflation dynamics resulting from persistent expansionary fiscal policies. Empirical evidence in the UK indicates that the creation of an independent monetary policy committee reduces the positive link between public investment and inflation persistence. Practical implications From a monetary policy perspective view, the best response to public investment policies is to increase the degree of independence to alleviate effects on inflation dynamics. From the perspective of fiscal policy, an independent central banker can provide the necessary conditions to undertake a long-run public investment plan, since long-run growth will not be undermined by adverse inflation inertia. Originality/value The authors introduce, in the debate of inflation persistence, both theoretically and empirically, the role of public investment and monetary policy design.

Global Financial Crisis and Its Impact on Russia

2009 ◽  
pp. 9-27 ◽  
Author(s):  
A. Kudrin
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Crisis ◽  
Central Bank ◽  
Global Financial Crisis ◽  
Developed Countries ◽  
Real Economy ◽  
Energy Prices ◽  
Russian Government ◽  
The Real

The article examines the causes of origin and manifestation of the current global financial crisis and the policies adopted in developed countries in 2007—2008 to deal with it. It considers the effects of the financial crisis on Russia’s economy and monetary policy of the Central Bank in the current conditions as well as the main guidelines for the fiscal policy under different energy prices. The measures for fighting the crisis that the Russian government and the Central Bank use to support the real economy are described.

Endogeneity of Monetary Policy Reaction Fun~tion: An Experience from Pakistan's Economy

1991 ◽  
Vol 30 (4II) ◽  
pp. 931-941
Author(s):  
M. Aynul Hasan ◽  
Qazi Masood Ahmed
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Money Supply ◽  
Relative Effectiveness ◽  
Reaction Function ◽  
Standard Result ◽  
Policy Variable ◽  
Target Values ◽  
Monetary Policy Reaction Function ◽  
Policy Reaction Function

Monetary policy, in general, refers to those steps taken by the Central Bank to achieve such broader objectives of the economy as growth, employment, external balance and price stability through changes in the money supply, interest rates and credit policies. The money supply thus created by the Central Bank should be in response to the changes in key macroeconomic target variables such as GNP, balance of payments, inflation, internal debt and unemployment. Indeed, a properly estimated monetary policy reaction function can provide useful information regarding such matters as to whether the Central Bank, in fact, has been systematically accommodating to the changes in the target variables. The reaction function can also provide insight into the question as to what should be the relevant indicators of the monetary policy. In addition, as argued by Havrilesky (1967), it may also play a crucial role in the formulation of long-term monetary policy strategy. The other important consideration in the development of a monetary policy reaction function pertains to the endogeneity of the monetary policy. As pointed out by Goldfeld and Blinder (1972), if a policy variable responds to the lagged (or expected) target values, then considering such a policy variable as exogenous would not only introduce the problem of misspecification but will also produce serious biases in the parameters estimated from those models. In particular, if the monetary policy variable happens to be strongly influenced by target variables, then the standard result of the relative effectiveness of the monetary policy vis-a-vis fiscal policy can be questionable on the grounds of reverse causation problem.

scholarly journals Money Decentralization under Direct Democracy Procedures. The Case of Classical Athens

2021 ◽  
Vol 14 (1) ◽  
pp. 30
Author(s):  
Emmanouil-Marios L. Economou ◽  
Nicholas C. Kyriazis ◽  
Nikolaos A. Kyriazis
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Direct Democracy ◽  
Hellenistic Period ◽  
International Currency ◽  
Monetary System ◽  
Mediterranean World ◽  
The Stability ◽  
City State

By analyzing the case of Athens during the Classical period (508-323 BCE) the main thesis of this paper is that under direct democracy procedures and the related institutional setup, a monetary system without a Central Bank may function relatively well. We focus on the following issues: (i) Τhe procedures of currency issuing in the Athenian city-state, (ii) why the Athenian drachma become the leading international currency in the Mediterranean world (iii) how and towards which targets monetary policy without a Central Bank was possible (iv) defining the targets of monetary policy and the mechanisms for its implementation (v) the role of money in the economy (vi) the issue of deficit spending (vii) the reasons of the replacement of the Athenian drachma as a leading currency by others from the Hellenistic period onwards (viii) the correlation of our findings regarding the decentralized character of monetary policy in Classical Athens to today’s realities, such as the issue of cryptocurrencies. Our analysis shows that monetary policy without a Central Bank was possible, with its foremost aim being the stability of the currency (mainly, silver coins) in order to enhance trust in it and so, make it an international currency which could outcompete other currencies. Since there was no Central Bank like today, monetary policy decisions were taken by the popular assembly of citizens in combination with the market forces themselves.

Central Bank Liquidity Management and the Signal Extraction Problem on the Money Market / Die Liquiditätssteuerung der Notenbank und das Signal-extraktionsproblem am Geldmarkt

2000 ◽  
Vol 220 (3) ◽  
pp. 284-301
Author(s):  
Ulrich Bindseil
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Term Structure ◽  
Management Strategies ◽  
Money Market ◽  
Signal Extraction ◽  
Maintenance Period ◽  
Liquidity Management ◽  
Expectation Theory

Summary Understanding the factors determining overnight rates is crucial both for central bankers and private market participants, since, assuming the validity of the expectation theory of the term structure of interest rates, expectations with regard to this “monadic” maturity should determine longer term rates, which are deemed to be relevant for the transmission of monetary policy. The note proposes a simple model of the money market within a two-day long reserve maintenance period to derive relationships between the relevant quantities, expectations concerning these quantities for the rest of the reserve maintenance period, and overnight rates. It is argued that a signal extraction problem faced by banks when observing quantities such as their aggregate reserve holdings and allotment amounts of monetary policy operations is at the core of these relationships. The usefulness of the model is illustrated by applying it to the analysis of three alternative liquidity management strategies of a central bank.

scholarly journals A SUNSPOT-BASED THEORY OF UNCONVENTIONAL MONETARY POLICY

2020 ◽  
pp. 1-32
Author(s):  
Roger E. A. Farmer ◽  
Pawel Zabczyk
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Rational Expectations ◽  
Balance Sheet ◽  
Unconventional Monetary Policy ◽  
Efficient Outcome ◽  
Complete Set ◽  
Pareto Efficient ◽  
Financial Securities

This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet. We construct a general equilibrium model where agents have rational expectations, and there is a complete set of financial securities, but where some agents are unable to participate in financial markets. We show that a change in the risk composition of the central bank’s balance sheet affects equilibrium asset prices and economic activity. We prove that, in our model, a policy in which the central bank stabilizes non-fundamental fluctuations in the stock market is self-financing and leads to a Pareto efficient outcome.

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