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On Some Recent Developments in Monetary Economics

Author

Listed:
  • P.D. Jonson

    (Reserve Bank of Australia)

  • R.W. Rankin

    (Reserve Bank of Australia)

Abstract

This survey is motivated by the major changes that have been occurring both within the financial sector and in the relationships between financial and other markets. These changes have complicated both monetary analysis and the practice of monetary policy. Monetary models based on simple aggregative relationships are not well equipped to analyse issues of structural change. Monetary policy has been forced to rely more on “judgement” and less on the application of these models and their suggested policy rules. One obvious example of this is the demise, or at least downgrading, of monetary targets in major western economies. This survey examines some of the main strands in the development of monetary economics in the past two decades. It argues that much of the policy prescription of monetary economics – especially reliance on monetary targeting – depends on simple “stylised facts” about the behaviour of regulated economies. These prescriptions cannot therefore be applied directly to economies where the regulatory structure is changing. Policy approaches such as Australia’s current use of a “check list” of indicators are discretionary to the extent that they involve judgements about the relative importance of different indicators. But it is argued that this discretionary approach develops, rather than overthrows, the previous approach.

Suggested Citation

  • P.D. Jonson & R.W. Rankin, 1986. "On Some Recent Developments in Monetary Economics," RBA Research Discussion Papers rdp8605, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp8605
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    File URL: https://www.rba.gov.au/publications/rdp/1986/8605.html
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    Cited by:

    1. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    2. Brian Silverstone, 2014. "Inflation Targeting in New Zealand: The 1987 Reserve Bank Questionnaire and Related Documents," Working Papers in Economics 14/11, University of Waikato.
    3. Warwick McKibbin, 1997. "Which Monetary-policy Regime for Australia?," RBA Annual Conference Volume (Discontinued), in: Philip Lowe (ed.),Monetary Policy and Inflation Targeting, Reserve Bank of Australia.
    4. Stephen Grenville, 1997. "The Evolution of Monetary Policy: From Money Targets to Inflation Targets," RBA Annual Conference Volume (Discontinued), in: Philip Lowe (ed.),Monetary Policy and Inflation Targeting, Reserve Bank of Australia.
    5. Victor Argy & Anthony Brennan & Glenn Stevens, 1990. "Monetary Targeting: The International Experience," The Economic Record, The Economic Society of Australia, vol. 66(1), pages 37-62, March.
    6. Goodhart, Charles, 1989. "The Conduct of Monetary Policy," Economic Journal, Royal Economic Society, vol. 99(396), pages 293-346, June.

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