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© 2022 International Monetary Fund WP/22/22
IMF Working Paper
Research Department
Monetary Policy Frameworks: An Index and New Evidence*
Prepared by D. Filiz Unsal, Chris Pa page or giou, and Hendre Garbers
Authorized for distribution by Chris Papageorgiou January 2022
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, IMF management, or FCDO.
ABSTRACT: We provide a multidimensional characterization of monetary policy frameworks across three pillars: Independence and Accountability, Policy and Operational Strategy, and Communications (IAPOC). We construct the IAPOC index by analyzing central banks’ laws and websites for 50 advanced economies, emerging markets, and low-income developing countries, from 2007 to 2018. Due to its scope and granularity, our index provides a holistic view of monetary policy frameworks which goes beyond existing measures of transparency or independence, as well as monetary policy or exchange rate regime classifications. Comparing the IAPOC index across countries and over time, we find that monetary policymaking is varied, fast-changing, and eclectic across the Policy and Operational Strategy and Communications pillars, especially in emerging markets and low-income developing countries.
RECOMMENDED CITATION: Unsal, D. Filiz, Chris Papageorgio u, and Hendre Garbers, 2022, “Monetary Policy Frameworks: An Index and New Evidence”. IMF Working Paper WP/22/22.
| JEL Classification Numbers: | E42, E52, E58, F33, O23 |
| Keywords: | Monetary Policy, Monetary Policy Regime, Exchange Rate Regime, Central Banks, Central Bank Independence, Central Bank Transparency |
| Author’s E-Mail Address: | dunsal@imf.org; cpapageorgiou@imf.org; hendrecg@gmail.com |
| JEL Classification Numbers: | E42, E52, E58, F33, O23 |
| Keywords: | Monetary Policy, Monetary Policy Regime, Exchange Rate Regime, Central Banks, Central Bank Independence, Central Bank Transparency |
| Author’s E-Mail Address: | dunsal@imf.org; cpapageorgiou@imf.org; hendrecg@gmail.com |
Title Page
WORKING PAPERS
Monetary Policy Frameworks: An Index and New Evidence
Prepared by D. Filiz Unsal, Chris Papageorgiou, and Hendre Garbers
Contents
Abstract
I. Introduction
II. What is a Monetary Policy Framework?
A. Definition
B. Scope
B. I. Independence and Accountability
B. II. Policy and Operational Strategy
B. III. Communications
III. The IAPOC Metric for Assessing Monetary Policy Frameworks
A. Three Axioms—Transparency, Coherence, and Consistency
B. Constructing the IAPOC Index
IV. The IAPOC Index
A. Evolving Monetary Policy Frameworks in EMs and LIDCs
B. De Facto Strengthening of Independence and Accountability
V. The IAPOC Index versus Transparency Indices
VI. The IAPOC Index versus Monetary Policy and Exchange Rate Regime Classifications
VII. Conclusion
References
Appendix A: The IAPOC Metric