Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Frameworks

Author/Editor:

Nils Mæhle

Publication Date:

February 7, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper discusses operational issues for countries that want to reform their monetary policy frameworks. It argues that stabilizing short-term interest rates on a day-to-day basis has significant advantages, and thus that short-term interest rates, not reserve money, in most cases should be the daily operating target, including for countries relying on a money targeting policy strategy. The paper discusses how a policy formulation framework based on monetary aggregates can be combined with an operational framework that ensures more stable and predictable short-term rates to enhance policy transmission. It also discusses how to best configure an interest-rate-based operational framework when markets are underdeveloped and liqudity management capacity is weak.

Series:

Working Paper No. 20/26

Subject:

English

Publication Date:

February 7, 2020

ISBN/ISSN:

9781513526850/1018-5941

Stock No:

WPIEA2020026

Format:

Paper

Pages:

57

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