Implementation of Monetary Policy and the Central Bank's Balance Sheet

October 1, 2001

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Format: Chicago

Andrea Schaechter. Implementation of Monetary Policy and the Central Bank's Balance Sheet, (USA: International Monetary Fund, 2001) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper discusses how the choice of central banks' operating targets influences the use of their monetary policy instruments and how the latter affect the central bank's balance sheet. This is of particular interest, since the monetary conditionality in IMF-supported programs has traditionally been linked to central bank balance sheet items. Quantity targeting tends to be practiced today mostly in countries in which money markets are not yet well-developed or a monetary aggregate is used as the intermediate target. Most other central banks prefer to target a short-term interest rate, which results in day-to-day changes in balance sheet items becoming endogenous.

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 Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/149
Stock No:

WPIEA1492001
ISBN:

9781451856897
ISSN:

1018-5941

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