Monetary Policy in the New Normal

Staff Discussion Notes, April 4, 2014

Source details

Authors: Tamim Bayoumi, Giovanni Dell'Ariccia, Karl F Habermeier, Fabian Valencia
Published: April 4, 2014
Series: Staff Discussion Notes
DOI: https://doi.org/10.5089/9781475561784.006

The Staff Discussion Note (SDN) takes stock of the debate on the shape that monetary policy should take after the crisis.
Revisits the pros and cons of expanding the objectives of monetary policy.
Examines the merits of turning unconventional policies into conventional ones.
Considers how to make monetary policy frameworks more resilient to the risk of being constrained by the zero-lower bound going forward.
Analyses institutional challenges to preserve central bank independence with regards to monetary policy, while allowing adequate government oversight over central banks’ new responsibilities.
Will draw policy conclusions where consensus has been reached, and highlight the areas where more work is needed to get more granular policy advice.

Expanding objectives of monetary policy:
- Reviews arguments for and against broadening central bank objectives beyond traditional inflation and output stabilization.
Unconventional to conventional policies:
- Assesses the merits of institutionalizing unconventional tools as part of regular policy toolkits.
Zero-lower bound resilience:
- Explores approaches to reduce the probability or impact of monetary policy being constrained by the zero-lower bound.
Institutional and governance challenges:
- Discusses preserving central bank independence in the context of new responsibilities.
- Considers mechanisms for adequate government oversight related to those new responsibilities.
Policy conclusions and gaps:
- Intends to draw policy conclusions where consensus exists.
- Identifies areas requiring further work for more granular policy advice.

Subject: Banking, Central bank policy rate, Financial sector stability, Inflation, Zero lower bound
Keywords: central bank, monetary policy, policy, policy rate, SDN

Source: IMF Staff Discussion Note "Monetary Policy in the New Normal" (April 4, 2014).