Financial market imperfections and monetary policy strategy
| Autor: | Meixing Dai |
|---|---|
| Rok vydání: | 2011 |
| Předmět: |
Macroeconomics
Economics and Econometrics Monetarism Friedman's k-percent rule Inflation targeting media_common.quotation_subject Monetary policy jel:E44 jel:E52 Monetary economics jel:E58 Forward guidance Interest rate Credit channel Open market operation Economics Imperfect financial markets non-price rationing inflation targeting monetary targeting macroeconomic stability Friedman’s k-percent rule feedback money growth rules two-pillar strategy media_common |
| Zdroj: | Economic Modelling. 28:2609-2621 |
| ISSN: | 0264-9993 |
| DOI: | 10.1016/j.econmod.2011.07.012 |
| Popis: | In a model with imperfect money, credit and reserve markets, we examine if an inflation-targeting central bank applying the funds rate operating procedure to indirectly control market interest rates also needs a monetary aggregate as policy instrument. We show that if private agents use information extracted from money and financial markets to form inflation expectations and if interest rate pass-through is incomplete, the central bank can use a narrow monetary aggregate and the discount interest rate as independent and complementary policy instruments to reinforce the credibility of its announcements and the role of inflation target as a nominal anchor for inflation expectations. This study shows how a monetary policy strategy combining inflation targeting and monetary targeting can be conceived to guarantee macroeconomic stability and the credibility of monetary policy. Friedman's k -percent money growth rule, which can generate dynamic instability, and two alternative stabilizing feedback monetary targeting rules are examined. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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