Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Frameworks
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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. 2020/026
Subject:
Banking Central bank policy rate Financial markets Financial services Interbank markets Interbank rates Monetary base Money Short term interest rates
English
Publication Date:
February 7, 2020
ISBN/ISSN:
9781513526850/1018-5941
Stock No:
WPIEA2020026
Pages:
57
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