Posts Tagged Strategy
Monetary Aggregates Play Little Role In The Conduct Of Monetary Policy
In conventional macroeconomic thinking, the money supply is considered the main determinant of long-run inflation. A variety of monetary aggregates have been proposed to measure the money supply. Yet, nowadays, monetary aggregates play little role in monetary policy deliberations at most central banks.
A new study in the Journal of Money, Credit and Banking examines the leading arguments for assigning an important role to tracking the growth of monetary aggregates when making decisions about monetary policy. The analysis finds that none of the arguments provides a compelling reason to assign a prominent role to monetary aggregates.
Tags: banks, economic, economy, Gates, Import, inflation, Information, Journal, michael woodford, monetary, monetary policy, monetary policy strategy, monetary trends, money, money supply, Special, Strategy, Study, targets, University, woodfordRelated posts
Monetary policy and the term structure of interest rates in Japan.
This paper is investigates the relationship between the Japanese yield curve and monetary policy. In the 1980s and 1990s average bond yields have risen from 5% to 8% and then fallen to 2% and the slope of the yield curve has swung from positive to negative to positive. We are interested in understanding the contribution of monetary policy to these movements in the yield curve.
One motivation for our interest is Japan’s recent experience. In spite of massive increases in monetary base and a zero nominal interest rate, economic growth has remained low and deflationary pressure has not abated. These events are raising new questions about the effectiveness of monetary policy under a zero nominal interest rate policy. Eggertson and Woodford (2003) argue that a monetary authority can still influence economic activity when nominal interest rates are zero by taking actions that affect market expectations about the future time path of variables such as interest rates, inflation or exchange rates. One way to assess the ability of a central bank to affect expectations is to look retrospectively and ascertain the extent to which previous monetary policy surprises have affected bond yields of different maturities. If monetary policy is indeed a potent tool for altering expectations then this should show up in the responses and variance decompositions of medium and long-term bonds yields to suitably identified shocks to monetary policy.
Tags: bond yields, Christian, economic, economy, exchange rate, exchange rates, Financial, Gates, Import, inflation, interest rate, interest rates, japan, market, models, monetary, monetary policy, monetary policy shocks, money, money supply, Strategy, structure of interest rates, term structure, term structure of interest rate, term structure of interest rates, woodford, yield curveRelated posts
Monetary Policy and Interest Rates
Among other things that influence interest rates, monetary policy is also one of them. Democratic governments use two policy tools to help their economies thrive. There is the fiscal policy and monetary policy.
First, let us discuss the difference of fiscal policy to monetary policy. Fiscal policy pertains to the power of the government with congresses or parliament’s consent to increase or decrease tax rates. To increase tax rates, would mean to take away the disposable income of civilians. Think of it this way, the economy is a wheel. The movement of money makes the wheel turn. When people spend less money, the economy turns slowly. So the government increases taxation. The extra money the government collects is then spent on projects that will pour money back into companies for government mandated projects. These companies in turn will give them back to the people by employing more employees or by paying their existing ones with more. Such spending is also known as “pump-priming” activities.
Another instrument of fiscal policy would be for the government to borrow money for its expenditures. They do this so as not to over tax their citizens and provoke protest actions against their management. However, borrowing is not always an option. Lenders do not easily part with their funds. The general economic environment is placed into consideration.
Tags: banks, borrow money, Business, economic, economy, Financial, fiscal, fiscal policy, fiscal policy and monetary policy, government, inflation, interest rate, interest rates, investing, low interest rate, low interest rates, Management, monetary, monetary policy, money, Normal, StrategyRelated posts
