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Implementation of Monetary Policy and the Central Bank's Balance Sheet

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  • Ms. Andrea Schaechter

Abstract

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.

Suggested Citation

  • Ms. Andrea Schaechter, 2001. "Implementation of Monetary Policy and the Central Bank's Balance Sheet," IMF Working Papers 2001/149, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/149
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    References listed on IDEAS

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    1. Mishkin, Frederic S., 1998. "International Experiences With Different Monetary Policy Regimes," Seminar Papers 648, Stockholm University, Institute for International Economic Studies.
    2. Ms. Kalpana Kochhar, 1996. "The Definition of Reserve Money - Does It Matter for Financial Programs?," IMF Policy Discussion Papers 1996/009, International Monetary Fund.
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    6. Mr. Mark Zelmer & Ms. Andrea Schaechter, 2000. "Adopting Inflation Targeting: Practical Issues for Emerging Market Countries," IMF Occasional Papers 2000/017, International Monetary Fund.
    7. Carpio, Gerard & Honohan, Patrick, 1993. "Excess liquidity and monetary overhangs," World Development, Elsevier, vol. 21(4), pages 523-533, April.
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    Cited by:

    1. Duo QIN & Xinhua HE & Pilipinas QUISING & Shiguo LIU, 2010. "Modeling Monetary Policies in China (PRC)," EcoMod2004 330600115, EcoMod.
    2. Dale F. Gray & Robert C. Merton & Zvi Bodie, 2006. "A New Framework for Analyzing and Managing Macrofinancial Risks of an Economy," NBER Working Papers 12637, National Bureau of Economic Research, Inc.
    3. Lamberte, Mario B., 2002. "Central Banking in the Philippines: Then, Now and the Future," Discussion Papers DP 2002-10, Philippine Institute for Development Studies.
    4. Qin, Duo & Quising, Pilipinas & He, Xinhua & Liu, Shiguo, 2005. "Modeling monetary transmission and policy in China," Journal of Policy Modeling, Elsevier, vol. 27(2), pages 157-175, March.
    5. Michael T. Gapen & Mr. Dale F Gray & Cheng Hoon Lim & Ms. Yingbin Xiao, 2005. "Measuring and Analyzing Sovereign Risk with Contingent Claims," IMF Working Papers 2005/155, International Monetary Fund.

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