Implementation of Monetary Policy and the Central Bank's Balance Sheet
IMF Working Papers, October 1, 2001
Source details
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- Implementation of Monetary Policy and the Central Bank's Balance Sheet
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Bibliographic details
- Authors: Andrea Schaechter
- Published: October 1, 2001
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451856897.001
Summary
- The paper examines how the choice of central banks' operating targets influences:
- the use of monetary policy instruments, and
- how those instruments affect the central bank's balance sheet.
- Relevance: Monetary conditionality in IMF-supported programs has traditionally been linked to central bank balance sheet items.
- Key contrast in operating frameworks:
- Quantity targeting is mostly practiced in countries where money markets are not yet well-developed or when a monetary aggregate is used as the intermediate target.
- Targeting a short-term interest rate is preferred by most other central banks; this approach makes day-to-day changes in balance sheet items endogenous.
Major findings and technical points
- Operating target choice determines instrument use and balance sheet dynamics.
- Under quantity targeting:
- Central bank balance sheet items are more directly controlled.
- This approach remains more common where money markets lack development or when monetary aggregates serve as intermediate targets.
- Under short-term interest rate targeting:
- Day-to-day balance sheet items become endogenous to market conditions and policy implementation.
- The discussion links these implementation mechanisms to the practice of monetary conditionality in IMF programs.
Subject areas and keywords
- Subject: Banking, Central bank balance sheet, Central banks, Demand for money, Financial services, Monetary base, Money, Open market operations, Short term interest rates
- Keywords: Central bank balance sheet, conditionality, Demand for money, foreign exchange, inflation targeting, interest rate targeting, Monetary base, monetary policy, monetary policy strategy, net domestic assets, net position, Open market operations, policy instrument, sheet item, Short term interest rates, WP
Publication metadata (as provided)
- Author: Andrea Schaechter
- Date: October 1, 2001
- Series: Working Paper No. 2001/149
- Issue: 149
- Volume: 2001
- Pages: 28
- DOI: https://doi.org/10.5089/9781451856897.001
- ISBN: 9781451856897
- ISSN: 1018-5941
- Stock No: WPIEA1492001
Source: IMF Working Papers — "Implementation of Monetary Policy and the Central Bank's Balance Sheet", Andrea Schaechter, October 1, 2001 (Working Paper No. 2001/149).