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Implementation of Monetary Policy and the Central Bank's Balance Sheet
Author:
Ms. Andrea Schaechter
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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 149
Language:
English
Publication Date:
01 Oct 2001
DOI:
https://doi.org/10.5089/9781451856897.001
ISBN:
9781451856897
ISSN:
1018-5941
Pages:
28
Keywords:
WP; inflation targeting; monetary policy strategy; interest rate targeting; policy instrument; sheet item; monetary policy; conditionality; net domestic assets; net position; foreign exchange; Monetary base; Short term interest rates; Central bank balance sheet; Open market operations; Demand for money
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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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund