Monetary policy and institutions

The territorial Executive shall be consulted with respect to decisions on monetary policy.

China s Monetary Policy Surprise

China s Monetary Policy Choice

What Monetary Policy Does China Need?

In China, unlike in advanced countries, monetary and sterilization policy are often one in the same. The degree to which monetary policy is expansionary depends on the degree to which the liquidity created by currency market intervention has been sterilized.

The currency was in theory governed by a rules based Currency Board, which the British invented for their smaller colonies. It tied the local currency to the British Pound, giving local authorities no discretion in monetary policy.

Shinzo Abe s Monetary Policy Delusions

It is time to adjust monetary policy.

Why is Monetary Policy Underrated?

Is US Monetary Policy Made in China?

1. Strongly anti inflationary monetary policy.

Moreover, unlike major developed economies, most of which have used up all of their conventional monetary policy ammunition by reducing their policy interest rates to zero, China has plenty of monetary stimulus on reserve to address cyclical disruptions. In these circumstances, it makes sense for China to lean more on monetary policy than on fiscal expansion.

Producing countries have also tried to contain price volatility by forming international cartels. But these have seldom worked.

A single monetary policy for a currency area comprising 11 and later 12 countries, each with a sovereign national government, was something entirely new. Would it be compatible with autonomous national fiscal policies?

On the one hand, pegging local currencies to the dollar renders monetary policy completely ineffective, as in a fixed exchange rate regime.

Typically, monetary policy is one of the policy tools for managing the balance of payments.

Of course, a country s monetary policy does affect exchange rates in the short term. But it does so only in relation to monetary policy in other relevant countries.

Unfortunately, monetary policymakers effort to operationalize the objective of ensuring that the value of money remains stable has taken on a life of its own. Today s economics textbooks assume that a primary objective of central banks is to stabilize consumer prices, rather than the value of money.

The IMF s Lending Overhaul

The market had strongly expected adjustments to UK monetary policy.

In addition to becoming bolder and more expansive, it has become increasingly intertwined with fiscal policy. This is most explicit in Japan, where monetary policy is a central component of Prime Minister Shinzo Abe s economic strategy, dubbed Abenomics, implying collaboration between the government and the central bank.

That brings us to monetary policy, the importance of which as a determinant of commodity prices is often forgotten. Monetary tightening is widely anticipated in the US, with the Federal Reserve having ended quantitative easing in October and likely to raise short term interest rates sometime in the coming year.

Expressing its concern about the poor representation of women in economic decision making, including in the formulation of monetary and fiscal policies as well as rules governing pay,

African Centre for Monetary Studies

A Devaluation Option for Southern Europe

These exclusive affairs of State include external relations, defence policy and monetary policy.

But the decisions that Scotland would have to make about its monetary arrangements in the months following a vote for independence are at least as likely to be confronted by some eurozone countries over the next couple of years. In fact, there is a natural link between the two situations.

Yet widespread concerns persist. The International Monetary Fund for example, has argued that any rate hike by the Fed would need an effective monetary policy communication strategy a polite way of saying that any monetary tightening in the US and other advanced economies would be premature.

The International Monetary Fund continued to assist the Government, through a close policy dialogue, in maintaining macroeconomic stability, especially in the area of fiscal policy.

The decision process and its execution are duly authorized on the deal transaction sheet by the Treasurer and the senior officer in charge for each individual currency and deposit transaction.

But, it has recognised the need to include monetary analysis in a very broad sense into its policy considerations. And the strategy was flexible enough to integrate the broadening and deepening of both the monetary and economic analysis.

As a result, questions about the role of monetary policy and the independence and accountability of central banks, once confined to rarefied academic discussions, are fixtures of broad policy debate. But, rather than try to define a single approach, central bankers should aim to develop individualized approaches within the orthodox monetary policy framework, which revolves around price stability and independence.

The ECB has never claimed that its strategy is the ultimate solution to the challenges monetary policy is confronted with. But, it has recognised the need to include monetary analysis in a very broad sense into its policy considerations.

For a given supply of money, an increase in the production of goods will increase the value of a currency, because each unit will buy more goods. Likewise, increasing the supply of money relative to a fixed amount of output will lead to a decline in the purchasing power of money, as each currency unit buys fewer goods.

As it is, the valuation of a country s currency is not so much determined by the performance of its economy as by the forces of supply and demand on foreign exchange markets. For a given supply of money, an increase in the production of goods will increase the value of a currency, because each unit will buy more goods.

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Currencies

Domestic monetary policy has become the first and last line of defense against growth slowdowns and financial panics, enabling policymakers to avoid pursuing other important, but far more difficult measures. Using monetary policy to compensate for deficiencies in other policy areas constitutes an institutional breakdown monetary policymakers are not necessarily getting it wrong, but they are constrained by the configuration of other policies.

Secondly, it would insulate domestic economies from external developments, thereby permitting monetary policy to focus on redressing unemployment.

International Monetary Fund (IMF)