IMF Working Papers

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

By Nils Øyvind Mæhle

February 7, 2020

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Nils Øyvind Mæhle. Monetary Policy Implementation: Operational Issues for Countries with Evolving Monetary Policy Frameworks, (USA: International Monetary Fund, 2020) accessed November 19, 2024

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.

Subject: Banking, Central bank policy rate, Financial markets, Financial services, Interbank markets, Interbank rates, Monetary base, Money, Short term interest rates

Keywords: Africa, Allotment system, Central bank, Central bank credibility, Central bank policy rate, Firm interest rate corridor, Interbank market interest rates, Interbank market rate, Interbank markets, Interbank rates, Interest rate, Interest rate determination, Interest rate spread, Liqudity management, Liquidity forecasting capacity, Market rate, Monetary base, Monetary policy, Monetary policy operations, Monetary policy transmission, Monetary targeting, Overnight interbank market rate, Policy rate, Rate, Short term interest rates, Targeted market rate, Trough central bank term-lending, WP

Publication Details

  • Pages:

    57

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/026

  • Stock No:

    WPIEA2020026

  • ISBN:

    9781513526850

  • ISSN:

    1018-5941

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